Prospect Theory Among College Students

Abstract

This study explores the application of prospect theory and decision-making among college students in regard to their academic performance. Prospect theory, originally developed by Daniel Kahneman and Amos Tversky in 1979, is an economic concept which tries to describe the way people will behave when given choices that involve probability. In particular, the theory assumes that individuals make decisions based on expectations of loss or gain from a relative position, causing loss aversion to be exhibited. To investigate the dynamics of the theory in a collegiate setting, an experiment will be conducted involving an anonymous survey distributed to college students. The survey presents them with hypothetical scenarios involving different academic standings and a choice between certain and probabilistic gains and losses to their final grade in a class. By examining the results of this survey, this study aims to reveal a deeper understanding of loss aversion and decision making among college students which may provide insight to those in the economic and educational fields