Decision Theory

Decision Theory (or Prospect Theory) is an economic principle that describes decisions between alternatives that involve risk.  It was developed by Daniel Kahneman (who was awarded the 2002 Nobel Prize in Economics for his work in Prospect Theory). His work revealed an important element of behavior under risk: the phenomenon known as loss aversion. This refers to the tendency for people strongly to prefer avoiding losses than acquiring gains.  This is an important sales concept because it states that people are more concerned with loss than they are gains.