How are incentives defined or described according to Prospect Theory?
A) Positive and negative incentives are unfulfilled promises and threats.
B) Incentives are those behavioral consequences that a person values positively or negatively.
C) Positive and negative incentives are stimuli that show an increase or decrease in utility
D) Positive and negative incentives are gains and losses from a neutral reference point

Question

Quizplus · Accepted Answer

According to Prospect Theory, incentives are framed as gains or losses from a neutral reference point, such as a person's current situation or status quo. Positive incentives are gains above the reference point, while negative incentives are losses below the reference point. This framing can influence decision-making and the perceived value of different options.

How Are Incentives Defined or Described According to Prospect Theory