Value Function

A value function is a concept used in decision-making and economics that represents how people evaluate the benefits of different choices. It shows how we perceive the value of outcomes based on gains or losses. Generally, people feel losses more intensely than equivalent gains, which means a loss of $100 feels worse than the joy of gaining $100. This helps to explain behaviors in uncertain situations, as people often make choices that aim to minimize losses rather than maximize gains, affecting everything from everyday decisions to investments and policy-making.