yeah, the scale of the graph was off. in general, that first difference between the +1 or -1 should have 4X 'sucky' than awesome. But, I really liked your 5 levels of explanation, especially the new information on how we get better at being rational when we make the decision multiple times, i.e. the curves become more similar after we've made the same investment or gambling decision several times and we've experienced the loss several times. Thanks for pointing that out!
I like the idea of explaining something at different levels! Even though it is the same underlying concept, there is an 'aha!' moment with each new level. Well done!
I think one more thinking about gains and losses is predicting your behaviour based on your emotion toward gains and losses. The feeling of losing 10 pounds is much worse than the feeling of receiving the exact same amount. That's why people are less likely to accept the bid of winning 10-20 pounds or losing 10 pounds. The prospect theory or reference point effect also explains how investors are willing to hold losing stock and sell winning stock very quickly. Sorry for my bad English if I wrote anything wrong.
So what kind of models can we use for a more repeated choice? Can we use the same model but change some parameters or something? Or can we get some data of a certain group for a certain behavior and use these data to get their specific parameters?
Very good video to introduce the high level idea of prospect theory. Just wandering if you can provide some papers related to the last part, saying people would be shifted from prospect theory framework to a rational model after the learning process? Thank you
I like your video, however at the graduate level you should have actually shown the assumptions behind Von Neumann Morgenstern expected utility and how prospect theory generalized it with a reference point to a status quo and weighting function for the probabilities.
It would depend on who you are, and how much money you have. For a poor person, they may be almost equally devastating because the chance of recovering it is nought either way. Similarly for a very rich person, say Jeff Bezos. Losing 100 thousand and losing 1 million might feel equally insignificant.
The scaling of my x axis is a bit weird, but hope you guys still understood it!
yeah, the scale of the graph was off. in general, that first difference between the +1 or -1 should have 4X 'sucky' than awesome. But, I really liked your 5 levels of explanation, especially the new information on how we get better at being rational when we make the decision multiple times, i.e. the curves become more similar after we've made the same investment or gambling decision several times and we've experienced the loss several times. Thanks for pointing that out!
How do your videos not get more views?!?!? They're so well produced and informative.
Thanks dude!
I like the idea of explaining something at different levels! Even though it is the same underlying concept, there is an 'aha!' moment with each new level. Well done!
Cheers Mark! Got the idea from another channel called wired, it’s a great format!
I think one more thinking about gains and losses is predicting your behaviour based on your emotion toward gains and losses. The feeling of losing 10 pounds is much worse than the feeling of receiving the exact same amount. That's why people are less likely to accept the bid of winning 10-20 pounds or losing 10 pounds. The prospect theory or reference point effect also explains how investors are willing to hold losing stock and sell winning stock very quickly.
Sorry for my bad English if I wrote anything wrong.
Thanks Pete, this helped me a lot understanding the Prospect theory! Great Video!
your videos are really helping me in a school project about behavioural econ ! thanks a lot !
On top of the informative content, the video also made me laugh!! Loved it, keep it up!
Thanks Piotr!
Thanks!
So what kind of models can we use for a more repeated choice? Can we use the same model but change some parameters or something? Or can we get some data of a certain group for a certain behavior and use these data to get their specific parameters?
did you not mention the value function at all? I wonder if you can use the value function and loss aversion to explain insurances and lotteries.
Very well explained.
Sir you explained really well......lots of respect and love from Pakistan 😇
Very good video to introduce the high level idea of prospect theory. Just wandering if you can provide some papers related to the last part, saying people would be shifted from prospect theory framework to a rational model after the learning process? Thank you
In description!
very well explained!
I like your video, however at the graduate level you should have actually shown the assumptions behind Von Neumann Morgenstern expected utility and how prospect theory generalized it with a reference point to a status quo and weighting function for the probabilities.
Absolutely was not a different explanation for different levels!!
Fantastic explanation, loved it!!!!
Thanks Peter!
but wouldnt 1000000 hurt way more than 100000?
It would depend on who you are, and how much money you have. For a poor person, they may be almost equally devastating because the chance of recovering it is nought either way. Similarly for a very rich person, say Jeff Bezos. Losing 100 thousand and losing 1 million might feel equally insignificant.
"the were obviously, the original labels used for Nobel prize winning paper" 😂
Also whats your twitter handle