Jim Leitzel
Abstract: Prospect theory, a mainstay model of behavioral economics, was designed by Kahneman and Tversky (1979) to offer a better descriptive account of human decision making than that provided by rational choice theory – and in many instances, it seems to deliver on its originators’ goal. Descriptions of plausible human behavior, then, should generally accord well with the features of prospect theory. The writings of William Shakespeare – an acclaimed observer of humanity – provide a classic data set of human behavior that can be tested for its adherence to prospect theory. This paper explores Shakespeare’s works, finding that the main elements of prospect theory – reference point dependence, loss aversion, and asymmetric gain/loss risk preferences – are well represented within the Shakespeare canon. Hamlet may be a rational actor (Leitzel 2023), but Shakespeare’s characters embrace prospect-theory-consistent behavior again and again.
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