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Explain how behavioral phenomena may help effectiveness

You have been hired as a consultant to present a one-hour seminar before a group of investment and corporate professionals. The main part of your job is to explain how behavioral phenomena may help the attendees to become more effective decision makers.

Furthermore, your presentation is even more focused; as your talk will be exclusively based on your learnings from Kahneman & Tversky's "Prospect theory: An analysis of decision under risk". In other words, just use that article as the sole focus for your presentation and response.

Furthermore and in addition to what you wrote in above based on Prospect theory, add your own insights related to the main question as asked in above. In other words, share your own views as how the attendees can become more effective decision makers in their line of business.

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Behavioral Phenomena and More Effective Decision Makers

For the past several decades, decision makers relied heavily on the expected utility of a project or investment to aid them in decision making. However, the different axioms of the expected utility theory assumes a rational and reasonable decision maker which studies show that it is not often the case. Furthermore, the risk profile of an investor significantly affects what projects he or she chooses in the end. For example, risk adverse investors would prefer certain prospect with lower rate or return than risky projects which expectedly have higher rates of return. Thus, Kahneman and Treversky (1979) developed an alternative theory in the evaluation of risky projects - the prospect theory. This theory emphasizes that decision makers put a lot of value on the prospects such as the certainty of a cash flow of a project. This paper explores how the prospect theory identifies the relationship of investor's behavior and more effective decision making.

The fundamental concept of the prospect theory is that "people ...

Solution Summary

The solution explains how behavioral phenomena may help effectiveness. How to make more effective decision makers is determined.