A behavioral economic theory describing how people choose between probabilistic alternatives involving risk, finding that losses loom larger than equivalent gains.
From Latin 'prospectus' (a view, outlook) + Greek 'theoria.' How people view risky prospects. Developed by Kahneman and Tversky (1979).
Prospect theory proved that losing $100 hurts MORE than gaining $100 feels good — we're wired to fear losses more than we value gains. That's loss aversion!
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