Kahneman & Tversky prospect theory (Econometrica 1979; JRU 1992) — loss aversion ratio ~2:1; fourfold pattern; certainty effect

Claim: Two canonical references:

• Kahneman, D. & Tversky, A. "Prospect Theory: An Analysis of Decision under Risk." Econometrica 47(2): 263–291 (1979).
• Tversky, A. & Kahneman, D. "Advances in Prospect Theory: Cumulative Representation of Uncertainty." Journal of Risk and Uncertainty 5: 297–323 (1992).

Empirical regularities established:

1. Loss aversion ratio ≈ 2:1 — losses loom roughly twice as large as equivalent gains across most studies.
2. Certainty effect — people overweight outcomes they perceive as certain.
3. Fourfold pattern — risk-aversion for gains of moderate-to-high probability, but risk-seeking for losses of moderate-to-high probability.

Confidence: Verified (foundational primary literature; replication-robust).

For Candid — applied to GC marketing decisions: The choice between (A) hire an estimator at $80K/year — felt as a known production expense — and (B) hire a marketing agency at $36K/year — felt as a discretionary non-production loss — is asymmetric not because the dollars are asymmetric but because (A) is mentally bracketed as production and (B) as non-production. The fact that (B) is less than half of (A) is irrelevant to the loss calculation.

The fourfold pattern also explains the otherwise-puzzling pattern of contractors gambling on cheap last-ditch lead sources (HomeAdvisor leads, Facebook lead-form campaigns) rather than committing to a structured marketing investment — risk-seeking for losses of moderate-to-high probability.

Related: [[crawford-real-work-vs-marketing-probabilistic-deterministic]] gives the cultural-identity companion to the behavioral-economics explanation.