Abstract: Daniel Kahneman’s findings in the field are now known as behavioral economics. By outlining some major differences between conceptions of decision-making in economics and psychology, the authors elaborate Kahneman’s specific contributions of Prospect Theory which has taken important steps towards a more accurate description of individual behavior under risk than expected-utility theory and provided researchers in economics with new insights and instruments in model building and empirical work.

Key words: Behavioral Economics, Prospect Theory, Daniel Kahneman, Heuristics