An introduction to Prospect Theory, by Krishna Mahendrakar, Wilson’s School

Last month, I reviewed Freakonomics by Stephen J. Dubner and Steven Levitt and learned how to view the world from a new perspective, critically analysing outcomes and the rationale leading to them. This led me to further discover the relatively new branch of economics aptly named behavioural economics. In classical economics, a core assumption also built into economic models is that economic agents behave rationally. Producers wish to maximise their profits and consumers wish to maximise their u