Prospect theory is a particular subset of behavioral economics, both heavily influenced by the collaboration of Daniel Kahneman and Amos Tversky. This 14 year collaboration produced ground breaking work in cognition theory and resulted in a Nobel Prize in Behavioral Economics. Their work has been cited in many fields of academic study, from architecture to artificial intelligence. In 2011, Kahneman published Thinking Fast and Slow, which is a great summary and introduction to their work in this field.
Prospect Theory, at heart, is an investigation as to how humans make the decisions that they do. In this regard it is very closely related to the traditional field of psychology, but where traditional psychology explores the formative process by which individuals develop motivational factors, prospect theory explores the mechanics by which information is observed and processed. Traditional Psychology explores why people respond to information the way that they do; Prospect Theory explores how they perceive information in order to respond. Both are necessary for a complete picture of the mental process.
Prospect Theory has offered several notable revelations about human beings, most notable is that every single person, regardless of socioeconomic status, gender, race, nationality, age, sexuality, I.Q., religion, etc..., everyone makes the same mistakes in the same ways. This is the second great Truth of developmental psychology: people are all the same. As psychologists the world over set themselves on fire, let me qualify that. People are not exact replicas of each other, but are the same in some interesting ways. In light of the first Truth, that everyone is different, this second Truth becomes the foundation for the First Law of Human Dynamics: because people are so very different, anything that is true about each us is a significant fact about the nature of all of us, or Ringdahl's Theory of Reflexive Humanity. As such things go, we can flip it around and see that anything that is true about all of us is a significant fact about the nature of each of us.