Prospect theory, which won Kahneman and Tversky the Nobel Prize, demonstrates that people evaluate outcomes relative to a reference point rather than in absolute terms, and that losses loom larger than equivalent gains. This explains why customers are more outraged by a $5 surcharge than they are pleased by a $5 discount. The article maps prospect theory principles to practical business decisions including pricing strategy, contract design, and change communication, showing how framing around reference points dramatically shifts acceptance rates.