Prospect Theory

Prospect Theory is a psychological framework that explains how users make decisions under uncertainty. It describes systematic deviations from rational choice: users are loss-averse (losses hurt more than equivalent gains feel good), they evaluate outcomes relative to reference points rather than absolute states, and they are sensitive to framing (the same outcome described differently produces different choices). In product design, Prospect Theory explains why users overvalue the status quo, fear switching, and respond to relative rather than absolute improvements.