Human Riddles in Behavioral Economics

Abstract

Human behavior is a diverse, complex, and highly interesting phenomenon. Despite the many differences that exist between any two people, we can find patterns that characterize typical behaviors in various situations, such as in a classroom or at a family dinner. The research field called behavioral economics studies human behavior in financial situations. In this article, I will present the main findings of the prospect theory, which I developed together with the late Amos Tversky. Prospect theory explains human choices in situations that involve gambling, and it answers questions such as whether people consider gains and losses equally and how a person’s initial financial situation influences the value they give to gains and losses. At the end of the article, I will share important insights from my scientific career and explain why happiness has two faces.