Prospect Theory (loss averse):
- People risk averse for high probaility of gain / low probability of loss
- People risk taker for high probaility of loss / high probability of gain
Utility Theory (risk averse):
- People risk averse for low losses at low income level
- People risk taker for high gain at high income level
Am I correct?
Another point: under Prospect Theory people tend to overreact to small probability events and underreact to mid/large probability events…how it is linked to the description above reported?