In prospect theory, the interplay of overweighting of small
probabilities and concavityconvexity of the value function leads to
the so-called fourfold pattern of risk attitudes. Each quadrant
shows an individual’s choice between two prospects (x; p) in the
first row and the individual’s risk attitude in the second row.
Gains
Losses
High probability
Choose (949) over (1000, 0.95) Risk averse
Choose (-1000,0.95) over (-949) Risk seeking
Low probability
Choose (1000, 0.05) over (51) Risk seeking
Choose (-1000,0.95) over (-949) Risk...