What is Prospect Theory in Marketing?

Learn Prospect Theory definition in marketing with explanation to study “What is Prospect Theory”. Study prospect theory explanation with marketing terms to review marketing course for online MBA programs.

Prospect Theory Definition

  • When consumers frame decision alternatives in terms of gains and losses according to a value function.

    Principles of Marketing by Philip T. Kotler, Gary Armstrong



Prospect Theory Explanation

Prospect hypothesis expect that misfortunes and additions are esteemed in an unexpected way, and in this manner people settle on choices dependent on saw gains rather than apparent misfortunes. Otherwise called the "misfortune revolution" hypothesis, the general idea is that if two decisions are put before an individual, both equivalent, with one exhibited as far as potential additions and the other regarding potential misfortunes, the previous alternative will be picked. As per Tversky and Kahneman, the sureness impact is shown when individuals incline toward specific results and underweight results that are just plausible. The assurance impact prompts people keeping away from hazard when there is a prospect of a definite increase. It likewise adds to people looking for hazard when one of their choices is a certain misfortune.

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