Prospect Theory predicts that risk aversion over small gambles implies that decisionmakers will avoid risk at almost any cost in large gambles.

Name: Prospect Theory predicts that risk aversion over small gambles implies that decisionmakers will avoid risk at almost any cost in large gambles.
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Question

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This is the prediction of expected utility theory. The "kink" at the reference point under prospect theory means that the utility function cannot be approximated by a straight line.

Prospect Theory Predicts That Risk Aversion Over Small Gambles Implies