Itm301 :: Principles of Info. Syst. in Bus. and Org
Prospect theory is utilized to make decisions that involve risks or gambles. This theory was developed in 1979 as a solution to the shortfalls and contradictions that were found in expected utility theory in certain situations. One of the most significant aspects of prospect theory is the suggestion that individuals avoid risk when they perceive their current prospects or situation to be positive (a gain decision domain), and individuals seek risk when they perceive the current prospects or situation to be negative (a loss decision domain). Additionally, the theory shows that individuals make decisions based on shifts in wealth versus total wealth itself. This shift in wealth becomes the reference point from where any new decisions are made. I think the underlying reasons why some lottery winners end up losing it all are because they weren’t financially educated when they came acquired the large sum and/or because they weren’t of the right mind frame to be able to handle the amount of money they won. Someone who makes a fortune on their own knows what they had to do to build that fortune. They learned about wealth-building through experience. While they may lose the fortune they built, they have the knowledge in their arsenal to be able to build it again (hopefully without making the mistakes that caused them to lose it the first time). The Average Joe who wins a lottery does not have that knowledge, so the mistakes they make are often permanent. A person is gambling whenever he or she takes the chance of losing money or belongings, and when winning or losing is decided mostly by chance. Gambling in Canada has grown at an unprecedented rate over the last decade and is an increasingly popular recreational activity. While gambling was once illegal, or viewed as a disreputable activity, social norms have shifted. Gambling is now a multi-billion dollar industry in Canada, and its growth is likely to continue. Surveys indicate that the