Prospect Theory:

People's decision-making changes based on the context of small amounts of money (like pennies) versus larger amount

Diminishing sensitivity refers to the idea that as the amount of money increases, the incremental value of gains or losses becomes less significant to individuals. For example, the difference between gaining $0 and $1 feels much larger than the difference between gaining $1,000 and $1,001. This principle helps explain why people may take more risks with small amounts of money, as the potential losses or gains feel less impactful.