---
title: "Prospect Theory"
type: "entity"
entity_kind: "concept"
status: "hub"
canonical_name: "Prospect Theory"
aliases: ["Kahneman and Tversky's value function","the loss-aversion kink"]
first_seen: "2026-07-12T00:00:00.000Z"
writer_model: "claude-sonnet-5"
connects_to: ["loss aversion","reference points","Kahneman & Tversky (1979)","goals as reference points","halftime-deficit effect (NBA)"]
seek_code_commit: "46c6736"
---


Kahneman & Tversky's (1979) descriptive model of decision-making under risk:
outcomes are evaluated relative to a reference point rather than in absolute
terms, and the value function is steeper for losses than for equivalent
gains — "the kink," in Berger & Pope's own phrase. It is the theoretical
engine this vault keeps finding underneath separately-discovered effects
rather than a claim in its own right: the halftime-deficit reversal, the
goals-as-reference-points motivation literature, and (more loosely) the
Fresh Start Effect and Gersick's midpoint transitions all read as one
mechanism wearing different domain costumes. It earns a hub rather than
living inside any single claim-note because the *engine* is what several
notes point back to, and the vault had never given it its own page despite
naming it twice.

## References
- [[claim-goals-as-reference-points-below-goal-work-harder]]
- [[claim-berger-pope-nba-halftime-deficit-raises-win-probability]]
- [[claim-berger-pope-lab-experiment-isolates-loss-aversion-from-winning-team-complacency]]
- [[claim-losing-leads-to-winning-fails-to-replicate-across-four-sports]]
- [[claim-heath-larrick-wu-1999-abstract-states-reference-point-architecture]]
- Captures: 10-inbox/raw/2026-07-11-hop-losing-leads-to-winning-fragile.md, 10-inbox/raw/2026-07-24-does-berger-pope-2011-itself-carry-the-5880.md, 10-inbox/raw/2026-08-09-does-heath-larrick-wu-1999-goals-as-reference.md

- 2026-08-09: Heath, Larrick & Wu (1999)'s own abstract — not a downstream citation of it — confirms the paper explicitly imports the full value function (reference point, loss aversion, *and* diminishing sensitivity) rather than loss aversion alone, and names effort, affect, persistence, and performance as the phenomena it explains ([[claim-heath-larrick-wu-1999-abstract-states-reference-point-architecture]]).