System 1: Operates automatically and quickly, with little or no effort and no sense of voluntary control (e.g., intuition). It is prone to biases.
System 2: Allocates attention to effortful mental activities that demand it, including complex computations (e.g., deliberation). It is slow and deliberate.
Cognitive Biases: Most decisions are made by System 1, leading to predictable errors such as anchoring, availability heuristic, confirmation bias, and overconfidence.
Prospect Theory: Describes how individuals make decisions under risk, showing that people value gains and losses differently, often weighting losses more heavily than equivalent gains.
Significance
Author Daniel Kahneman was awarded the Nobel Memorial Prize in Economic Sciences in 2002 for his work on prospect theory.
The book profoundly influenced fields such as behavioral economics, psychology, and management, reshaping the understanding of human decision-making.