Risk Decision-Making and Enterprise Management under Uncertainty Condition Based on Prospect Theory

The human's decision-making cannot be completely rational as described in Expected Utility Theory because human could not get entire information to make decision;however,Prospect Theory has important influence on this area.First,the paper analyzes the difference of hypothesis,principle,value function and weighting function between Prospect Theory and Expected Utility Theory in order to fully understand Prospect Theory.Secondly,the paper illustrates Prospect Theory is applied into risk decisionmaking by enterprise,etc.changing risk preference thought changing reference point and difference of using loss and getting sensitivity.Finally,the paper discusses the application of Prospect Theory on management of performance,publishing good /bad news and marketing strategy design.