A theory of “irrational” economic behavior. Prospect theory holds that there are recurring biases driven by psychological factors that influence people’s choices under uncertainty. In particular, it assumes that people are more motivated by losses than by gains and as a result will devote more energy to avoiding loss than to achieving gain. The theory is based on the experimental work of two psychologists, Daniel Kahneman (who won a Nobel Prize for economics for it) and Amos Tversky (1937–96). It is an important component of behavioral economics.