Prospect theory is based on behavioral economists' understanding of how people

A) react to good things (or gains) and bad (or losses) .
B) make predictions about their future income.
C) search for job prospects or business prospects.
D) behave under stressful conditions.

Prospect Theory

A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are unknown.

Behavioral Economists

Scholars examining how psychological, cognitive, emotional, cultural, and social influences affect the financial choices of individuals and organizations.

Gains

Increases in economic benefits, such as profits, revenue, or utility.