# Utility theory vs Prospect theory

August 14, 2020

- Utility theory assumes that decision makers makes decisions on the absolute utility of the outcome. (90% chance of lottery winning is valued at 90% chance of winning)
- People are poor rational actors, and that’s why Prospect Theory was brought forth.
- I talks about decision weights. (90% chance of lottery winning is perceived as a 100% chance of winning)

## Meta

- source: [thinking-fast-and-slow]
- related: [utility-theory] [prospect-theory] [decision-making]