Law & Economics

Foundations of Law and Economics

Intermediate

Prospect Theory

A behavioral model of decision-making under risk in which people evaluate gains and losses relative to reference points and often weigh probabilities nonlinearly.

Why It Matters

Prospect theory is used to analyze settlement behavior, damages, risk regulation, investor behavior, consumer contracts, and legal rules that change reference points.

Selected Literature

A short list of directly relevant archive entries.

Related Cases

1707

Foundations of Law and Economics

Keeble v. Hickeringill

11 East 574, 103 Eng. Rep. 1127 (K.B. 1707)

Property protection, malicious interference, and incentives to make productive use of land.

1805

Foundations of Law and Economics

Pierson v. Post

3 Cai. R. 175 (N.Y. Sup. Ct. 1805)

First possession, capture rules, and the administrability of property rights in wild animals.

1854

Foundations of Law and Economics

Hadley v. Baxendale

9 Exch. 341, 156 Eng. Rep. 145 (1854)

Foreseeability, information disclosure, and limits on consequential damages for breach of contract.

1879

Foundations of Law and Economics

Sturges v. Bridgman

11 Ch. D. 852 (1879)

Nuisance, coming to the nuisance, and reciprocal conflicts over incompatible land uses.