{"id":1087,"slug":"tversky-kahneman-1992-probability-weighting-certainty-effect","title":"Tversky & Kahneman 1992 (JRU) — cumulative prospect theory; probability weighting w(p); certainty effect","kind":"reference","scope":"business","status":"current","audiences":["kevin","candid-team"],"topics":["psychology-aversion","behavioral-economics"],"reference_body":"**Claim:** Tversky and Kahneman's 1992 paper \"Advances in prospect theory: Cumulative representation of uncertainty\" introduces a probability-weighting function w(p) applied to cumulative probabilities. It has an inverse-S shape: **low probabilities are overweighted** (why lotteries sell, why people buy flight insurance) and **moderate-to-high probabilities are underweighted** (the certainty effect). Median weighting curvatures: γ = 0.61 (gains), δ = 0.69 (losses). Median value-function curvature exponents: α = β = 0.88. Median λ = 2.25.\n\n**Source:** Tversky, A., & Kahneman, D. (1992). *Journal of Risk and Uncertainty* 5(4): 297–323. https://link.springer.com/article/10.1007/BF00122574\n\n**Confidence:** Verified.\n\n**For Candid:** The **certainty effect** is operationally critical. Buyers radically over-prefer certain outcomes to merely probable ones. Marketing and custom-development pitches that traffic in probabilistic upside must anchor on the *certain* deliverable, not the probable outcome. A page redesign with a fixed deliverable and fixed price starts from a certain anchor; a \"growth program\" priced against probable lead volume sits in the underweighted-probability zone where buyers will discount the upside heavily.\n\n**Operationalized as:** [[rule-lead-with-certain-deliverable-not-probable-outcome]].","rationale_body":null,"metadata":null,"links":{"outgoing":[{"slug":"research-brief-risk-aversion-post-failure-may-2026","title":"Research brief: risk aversion, loss aversion, and post-failure decision patterns in GC and trades-business decision-makers (May 2026)","kind":"reference","scope":"business","link_type":"relates-to"},{"slug":"kahneman-tversky-prospect-theory-loss-aversion-2to1","title":"Kahneman & Tversky prospect theory (Econometrica 1979; JRU 1992) — loss aversion ratio ~2:1; fourfold pattern; certainty effect","kind":"reference","scope":"business","link_type":"relates-to"}],"incoming":[{"slug":"fourfold-pattern-risk-preferences-gc-cognitive-signature","title":"Fourfold pattern of risk preferences — the cognitive signature observed in GC sales conversations","kind":"reference","scope":"business","link_type":"depends-on"},{"slug":"pitch-categories-pre-emptively-defeated-by-gc-cognitive-profile","title":"Pitch categories pre-emptively defeated by the GC cognitive profile — seven types this audience rejects before evaluating on merits","kind":"reference","scope":"business","link_type":"depends-on"},{"slug":"rule-lead-with-certain-deliverable-not-probable-outcome","title":"R3 — Lead with the certain deliverable, not the probable outcome; anchor on what is guaranteed, then layer probable results above","kind":"rule","scope":"business","link_type":"depends-on"}]},"created_at":"2026-05-25T13:13:30.930Z","updated_at":"2026-05-25T13:13:30.930Z"}