Guides

Risk & Prospect Theory

Browse 6 free mental model guides in Risk & Prospect Theory.

Guides in this category

Two classic experiments revealing how human decisions consistently violate standard economic theories about rational choice under uncertainty.

Our tendency to avoid unknown probabilities more than known risks, shaping decisions from medical choices to financial investments.

The guaranteed amount you'd accept instead of a risky option, and the extra reward you require for taking that risk.

People value losses about twice as much as equivalent gains, and decisions depend on reference points rather than final outcomes.

How preferences over fair gambles relate to utility, and how Arrow-Pratt measures quantify local risk aversion.

A method for ranking risky choices by determining if one option is objectively better than another, regardless of your risk tolerance.