One assumption of prospect theory is called the certainty effect.This means that:
A)when making decisions,people give greater weight to outcomes that are a sure thing.
B)people are certain that they want to avoid risk but are unsure that they want to maximize gains.
C)when making decisions,people rely more on past outcomes than on future speculations.
D)people are certain that they want to maximize gains but are unsure that they want to avoid risks.

Question

Quizplus · Accepted Answer

The certainty effect refers to the tendency for people to give greater weight to outcomes that are certain or guaranteed, compared to outcomes that are merely probable or uncertain. This means that when making decisions, people are more likely to choose options that offer a sure thing, even if the potential payoff is smaller than a riskier option with a higher potential payoff.

One Assumption of Prospect Theory Is Called the Certainty Effect