Advances in Politics and Economics ISSN 2576-1382 (Print) ISSN 2576-1390 (Online) Vol. 7, No. 2, 2024 www.scholink.org/ojs/index.php/ape 29 Original Paper The Situation in The Middle East from the Perspective of Prospect Theory: “Hedging” or “Speculating” Hanyi Tang1* 1 School of International Studies, Dalian University of Foreign Languages, Dalian116044, China * Hanyi Tang, School of International Studies, Dalian University of Foreign Languages, Dalian116044, China Received: January 20, 2024 Accepted: March 11, 2024 Online Published: March 27, 2024 doi:10.22158/ape.v7n2p29 URL: http://dx.doi.org/10.22158/ape.v7n2p29 Abstract Prospect theory, which emphasizes the non-linear relationship between risk and reward, is an important concept in the fields of psychology and behavioral economics, and focuses on the decision-making process of individuals in the face of risk and uncertainty. In the field of international relations, Prospect Theory is of great significance to the study of decision-making of international actors. This paper combines the overall framework of Prospect Theory, based on the relevant theoretical doctrines of geopolitics, and sets the risk perception and potential benefit seeking of the two parties as independent variables, and the decision-making behavior and strategic choices of the two parties as dependent variables. By analyzing the behavioral patterns of the participants and exploring their “hedging” and “speculative” behavioral choices, we can better understand their decision-making process and perhaps provide valuable insights into their search for a peaceful solution. Keywords “prospect theory”,the middle east, “hedging”, “speculation” 1. Introduction The situation in the Middle East has long been a global focal point of attention. The roots of this geopolitical situation are complex, involving historical, religious, national identity, territorial rights, and security issues. On October 7, 2023, the Islamic Resistance Movement (Hamas) announced a military operation against named “Al-Aqsa Flood”. As of March 2024, the ongoing situation has resulted in 30,900 deaths in the Gaza Strip, with the escalating the situation in the Middle East drawing wide international concern. This situation affects not only the direct participants but also impacts the security and stability of the entire Middle East and the global community. www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 30 Published by SCHOLINK INC. To deeply understand the the situation in the Middle East, many theories and analytical frameworks in international relations have been applied to its study. Prospect Theory, a behavioral economics theory, offers us a unique perspective to examine such complex situations. Proposed in 1979 by Nobel laureate Daniel Kahneman and Amos Tversky, it was initially aimed at explaining the behavioral patterns of individuals facing risky decisions. Unlike traditional expected utility theory, Prospect Theory suggests that decision-makers exhibit a stronger aversion to losses than to equivalent gains, leading to risk-seeking behavior when facing potential losses and risk-averse behavior when potential gains are on the line. Within the context of the the situation in the Middle East, this theory can be used to interpret the behaviors of both sides when facing security and political risks, especially in analyzing the application of “hedging” and “speculative” strategies. This paper employs a literature review method, integrating the overall framework of Prospect Theory through historical review and process tracing methods to apply it to the the situation in the Middle East, thereby more comprehensively understanding the motives and decision-making processes of both parties in the situation. Furthermore, this paper attempts to offer possible new solutions for mediating this enduring situation. 2. Literature Review 2.1 Theoretical Elucidation 2.1.1 Prospect Theory Prospect Theory, introduced by psychologists Daniel Kahneman and Amos Tversky in 1979, is a behavioral economics theory that describes how people make decisions when faced with risk. It significantly revises the traditional Expected Utility Theory, which assumes that individuals are always rational in their decision-making, meaning they always choose the option with the greatest expected utility. However, Kahneman and Tversky demonstrated through experiments that individuals often make irrational decisions, especially when facing potential losses. This paper argues that Prospect Theory’s research elements mainly consist of three aspects: (1) Reference Points, which are crucial for presenting information, forming gain or loss frames, and making decisions. Reference points occupy a central position in Prospect Theory. They refer to a benchmark or standard that an individual bases their decisions on, where outcomes above this point are considered gains and those below are considered losses. Typically, the current status quo serves as the reference point for decision-makers, though subjective expectation levels can also serve as a standard. (2) Hedging, refers to behaviors in gain scenarios, i.e., in the “winning zone,” where decision-makers choose to hedge by diversifying risks to protect themselves from potential losses. Hedging usually represents risk aversion, not aimed at gaining additional profit but ensuring the stability and predictability of returns. (3) Speculation, involves behaviors in loss scenarios, i.e., in the “losing zone,” where decision preferences shift towards risk-seeking. Faced with high risk, as risk preferrers, individuals are willing to take on certain risks in the hope of achieving higher returns. www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 31 Published by SCHOLINK INC. 2.1.2 Applicability of Prospect Theory in International Relations and Foreign Policy Analysis The applicability of Prospect Theory in the fields of international relations and foreign policy analysis is manifested in its provision of a unique perspective for understanding state behavior, especially in revealing how states make decisions when faced with potential international risks and rewards. It allows for an in-depth analysis of the loss aversion tendency exhibited by state actors in the formulation of foreign policies, where there is a more active and sensitive approach towards protecting national interests and avoiding potential losses than pursuing potential gains of the same magnitude. This is particularly evident in areas such as arms races, territorial disputes, and economic sanctions; moreover, Prospect Theory also elucidates the nonlinear probability weighting phenomenon demonstrated by state actors when assessing the likelihood of international cooperation or not, where an excessive focus on low-probability but high-impact events can lead to the formulation of overly defensive or adventurous policies. (Kahneman & Tversky, 1979) Therefore, a deep understanding and application of Prospect Theory not only aids in predicting and analyzing decision-making behavior in international politics but also provides theoretical guidance and strategic insights for concluding more stable and mutually beneficial international agreements, formulating more effective crisis management strategies, and building long-term frameworks for peace and cooperation. 2.2 Overview of Existing Research Existing research on international relations offers a diverse range of perspectives and analytical frameworks on the situation in the Middle East. Given the complexity of the issue, scholars and social commentators both domestically and internationally have provided various viewpoints. Analyses cover multiple areas within the field of international relations, including international law, peace resolution studies, as well as international political economy. In terms of theoretical analysis, Mark A. Tessler, a renowned American Middle East studies expert, explored various dynamics and influencing factors within the the situation in the Middle East, including international intervention, regional politics, economic conditions, and the construction of national identity in his work (1994). This exploration demonstrates the multi-layered and complex nature of the situation. (Mark,1994) From the perspective of international law and human rights, John Dugard, a South African international law scholar, analyzed the legal issues within the the situation in the Middle East in “International Law and the the situation in the Middle East: A Rights-Based Approach to Middle East Peace” (2013). This analysis includes the provisions of international law regarding occupation, settlement construction, and human rights violations, and explores the role and responsibility of the international community in resolving the case and promoting peace. (John, 2013) In terms of case resolution strategies and prospects, Johan Galtung, known as the “Father of Peace Studies”, proposed a theoretical framework for peacebuilding in “Peace by Peaceful Means: Peace and Battle, Development and Civilization” (1996). He explored possible pathways to achieving peace in the situation. The analysis includes the concepts of structural and cultural violence, mentioning methods to www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 32 Published by SCHOLINK INC. resolve underlying cases by establishing more equitable and inclusive social structures. (Johan, 1996) These documents represent just a fraction of the extensive research on the situation, providing deep insights into this complex situation from historical, legal, and peace theory perspectives among others. While existing research offers illuminating explanations for the strategic choices of both parties in the case, there are still areas that require further refinement: First, existing literature does not seem to explore the decision-making behavior of the parties involved in the battle within a theoretical framework of “foreign policy analysis” of states; second, the representativeness of existing literature on the case analysis may be insufficient, with most studies perhaps overly focusing on one party’s perspective, lacking a comprehensive consideration of the diverse viewpoints of both parties involved in the case as well as the international community, which may lead to biases and incomplete understanding; third, existing literature has not provided sufficient explanations for the timing and context of specific policy changes. Why the decision-makers adopted specific policies at certain times remains under-explained. A thorough analysis of the historical, economic, and political factors behind these policy changes is crucial for a comprehensive understanding of the situation’s dynamics and potential solutions. This paper introduces Prospect Theory from foreign policy analysis into the decision-making perspective of the situation in the Middle East, using it as a framework for an exhaustive interpretation of the motivations behind the decisions of both parties in the case, and offers what the author considers to be practical measures and solutions. 3. The History and Current State of the situation in the Middle East 3.1 Historical Background and Roots 3.1.1 The Rise of Zionism and Competition for Land The tensions in the region have deep historical roots, traceable to the late 19th century with the rise of Zionism, marking the beginning of this longstanding battle. Zionism is a nationalist movement aimed at re-establishing a sovereign state for Jewish people on their historical homeland, in response to anti-Semitic persecution. This movement attracted Jews from around the globe. From the late 19th to the early 20th century, thousands of Jewish immigrants flowed into the region, which was then predominantly inhabited by Arabs. During this period, the Jewish community gradually strengthened their presence in the area by purchasing land, establishing farms, and settlements. However, these activities heightened tensions with the local Arab community. Arab residents, observing the influx of foreigners and their land acquisition, felt their way of life and land ownership were threatened. Over time, relations between the two groups grew increasingly tense, laying the groundwork for later cases. 3.1.2 The United Nations Partition Plan and the Establishment As the situation escalated, the international community sought to resolve the issue through the United Nations Partition Plan of 1947, which proposed dividing the territory into two independent states: one Jewish and one Arab, along with a special international zone controlled by the international community, www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 33 Published by SCHOLINK INC. including Jerusalem and Bethlehem, areas of profound religious significance to Jews, Christians, and Muslims. However, this plan was not accepted by the Arab world, which rejected the proposal to divide land. The war caused widespread shock in the Arab world and is referred to as the “Nakba” (meaning “catastrophe”), marking the beginning of the refugee issue and a key moment in the history of the the situation in the Middle East. The Nakba represents not only the displacement of thousands but also symbolizes a nation’s profound loss of land, home, and identity. This trauma still occupies a significant place in the collective memory of continues to influence the course of the situation in the Middle East. (Yao, 2017) 3.2 Battle Development and Current Situation Over the subsequent decades, tensions in the region escalated through more wars and battles. In the Six-Day War of 1967, they occupied the Gaza Strip, the West Bank, East Jerusalem, and the Golan Heights, the control of which remains one of the core issues of the case to this day. The Yom Kippur War of 1973 further demonstrated the region’s instability. In 1993, after prolonged violence and instability, the Liberation Organization (PLO) and the other government signed the Oslo Accords, marking the first mutual recognition between the two sides and establishing temporary governmental institutions for people in autonomous areas. However, the peace process did not advance smoothly, with the Second Intifada (Al-Aqsa Intifada) in the late 1990s to early 2000s resulting in significant casualties and further deterioration of relations between the two nations. In the early 21st century, despite numerous mediation attempts by the international community, the situation in the Middle East remains an unresolved issue. The settlement activities in the West Bank, the blockade of the Gaza Strip, and ongoing military cases have kept the region’s situation tense. Internal divisions, mainly represented by the political split between Hamas (controlling Gaza) and Fatah (dominating the West Bank), have added complexity to the case. On October 7, 2023, Hamas launched “Operation Al-Aqsa Flood,” also known as the Hamas raid, a large-scale attack by the Islamic armed organization Hamas from the Gaza Strip on adjacent areas, leading to the outbreak of the war. (Hobart William Smith Colleges, 2023) Before launching the attack, Hamas conducted reconnaissance on kibbutzes near the border and devised a detailed plan aimed at killing as many civilians as possible, taking hostages, especially targeting youth centers and elementary schools, and quickly transporting hostages to the Gaza Strip. The attack began in the early morning, with at least 3,000 rockets intensively bombarding the area, while militants were transported into territory using vehicles. Militants breached the Gaza barrier, attacking military bases and massacring civilians in nearby communities. At a music festival, at least 260 civilians were slaughtered. The soldiers and civilians, including women and children, were taken hostage to the Gaza Strip. Figures such as U.S. President Joe Biden described this day as “the worst massacre of Jews since the Holocaust.” (Kekauoha, 2023) The current state of the the situation in the Middle East is multifaceted, encompassing ongoing security www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 34 Published by SCHOLINK INC. issues, humanitarian crises, disputes under international law, and challenges to regional stability. A peaceful resolution requires addressing all these issues, including the determination of final borders, refugee rights, the status of Jerusalem, and ensuring the security and prosperity of the peoples of both states. (Zhang, 2023) Despite numerous attempts at peace in the past, a lasting and comprehensive solution remains elusive to date. 4. Hedging and Speculative Behaviors 4.1 IDF: “Hedging Behavior” Decision-Making 4.1.1 Decision Choices In the situation in the Middle East, IDF, being in a position of absolute advantage in armed cases, or in the “winning zone,” opts for “hedging behavior,” a strategy to protect itself from potential losses by diversifying risks. “Hedging behavior” holds a significant place in its policy towards its overall international strategy. These actions aim to reduce security risks, maintain national stability, avoid unnecessary problems, ensure the country’s sustainable development and international status, and secure long-term survival. Firstly, in terms of security, the choice of hedging behavior is reflected in its strong national defense force and advanced military technology. And invests in sophisticated defense systems and intelligence networks, such as the “Iron Dome” missile defense system, to mitigate threats from rockets and short-range ballistic missiles. Their robust intelligence capability, capable of providing timely warnings of potential terrorist attacks and security threats, is a key component of its hedging strategy. Secondly, in diplomacy, hedging is evident in the maintenance of relations with global and regional powers. They strives to keep a close strategic partnership with the United States while also seeking stable relations with other major countries like Russia and China. In recent years, They has reduced regional isolation and sought new strategic partners by normalizing relations with some Arab countries, such as the UAE and Bahrain. Furthermore, regarding the issue, IDF’s hedging behavior is manifested in its participation in peace negotiations, although these efforts are often frustrated due to differences in positions between the parties. Through negotiations, IDF seeks to establish its security needs while attempting to avoid negative international public opinion and potential sanctions. Additionally, some of IDF’s policies in the West Bank, such as the construction of the security barrier and restrictions on access to certain areas, are part of its hedging strategy, aimed at reducing terrorist attacks and protecting border security. However, IDF’s hedging actions are not without controversy. The international community often criticizes some of IDF’s measures in dealing with the issue, such as settlement construction and the blockade of the Gaza Strip. While these actions are intended to protect national security, they also exacerbate tensions with the people and affect IDF’s international image. Overall, IDF’s hedging behavior is part of its comprehensive national security strategy, designed to maintain stability, reduce risks, and ensure the country’s long-term interests. The formulation and www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 35 Published by SCHOLINK INC. execution of these strategies are a continual process of adjustment, taking into account internal security, regional dynamics, and the reactions of the international community. 4.1.2 Decision Motives—An Analysis Based on Prospect Theory Prospect Theory posits that decision-makers are more sensitive to losses than to an equivalent amount of gains, a phenomenon known as loss aversion. This aversion to loss prompts IDF to adopt hedging behaviors in decision-making to avoid potential losses. For IDF, when in the “winning zone”, the losses it most seeks to avoid are security threats, international isolation, and economic damage. Therefore, by strengthening defense systems, building international alliances, and remaining active in peace negotiations, which attempts to minimize these risks. In terms of probability weighting, Prospect Theory suggests that people tend to treat probabilities nonlinearly, being overly sensitive to small probabilities of significant losses. Positioned in a region filled with uncertainties, the faces the potential for catastrophic outcomes from even low-probability security threats. Therefore, it engages in hedging behaviors to prepare for and guard against these potential low-probability events, such as constructing the Iron Dome missile defense system to protect against rocket attacks from hostile forces. Additionally, changes in reference points constitute a significant factor. The decision-making reference points are influenced not just by the current state but also by its historical experiences, security needs, and national identity. Wars, terrorist attacks, and diplomatic isolation throughout history have shaped the backdrop of decision-making, leading to a more cautious and defensive stance towards future security and political issues. This has resulted in the adoption of hedging behaviors, such as utilizing diversified diplomatic measures and military preparedness to ensure the nation’s survival and prosperity. In summary, according to Prospect Theory, the motivation behind the choice of hedging behavior is a complex decision-making process where loss aversion, probability weighting, and changes in reference points interact. These elements collectively drive to adopt comprehensive measures in maintaining security, avoiding losses, and preparing for an uncertain future. These hedging behaviors represent the strategic choices in responding to a complex security environment and unstable regional politics, reflecting its efforts to maximize national interests and ensure the safety of its citizens amid changing circumstances. 4.2 Islamic Resistance Movement (Hamas): “Speculative Behavior” Decision-Making 4.2.1 Decision Choices In the situation in the Middle East, the Islamic Resistance Movement (Hamas) is in a disadvantaged position in the armed case, or in the “losing zone,” and thus opts for “speculative behavior.” This decision-making preference shifts towards risk-seeking, meaning that as risk preferrers, they are willing to undertake certain risks in the hope of achieving higher returns. Their “speculative behavior” decision-making is a response to the complex political, military, and social environment, aimed at gaining strategic advantages or altering an unfavorable status quo through proactive measures. (Lin, www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 36 Published by SCHOLINK INC. 2006) Hamas’s actions reflect its multidimensional strategy as both a political and military organization, including the pursuit of power, status, and influence, as well as a commitment to long-term goals. As a political and military organization, Hamas’s decision-making often revolves around how to effectively resist occupation, enhance its status among the populace, and play a significant role in broader regional politics. Launching sudden military attacks or adopting radical political stances are often seen as ways through which Hamas seeks to shake the status quo, attract international attention, or reinforce its image as a resistance force. The “Operation Al-Aqsa Flood” initiated by Hamas on October 7, 2023, a large-scale attack from the Gaza Strip on neighboring areas, is a clear example of “speculative behavior” decision-making. In the military domain, Hamas’s speculative behavior includes, but is not limited to, launching rocket attacks, creating explosive incidents, or digging tunnels for attacks. These actions aim to exert pressure on IDF while showcasing Hamas’s military capability. However, this strategy often provokes a strong response, leading to casualties among civilians and condemnation of Hamas by the international community. In the political domain, Hamas furthers its political objectives by participating in elections, forming governments, or negotiating with international organizations. Through these speculative actions, Hamas aims to enhance its legitimacy and influence as a political entity, while also seeking opportunities for support and cooperation within the complex regional politics. However, Hamas’s speculative actions are not without risks and costs. Its radical military and political strategies often provoke strong domestic and international reactions, potentially leading to economic hardship, humanitarian crises, and political isolation. These actions also contribute to increasingly tense relations with other factions, especially Fatah, which dominates the West Bank. Overall, speculative behavior in the case is manifested as a risky strategic choice, often adopted as a radical strategy when faced with significant pressure from potential losses. For Hamas, when their territorial integrity and national existence are threatened, they may choose to resist through violent means, even if such actions could provoke more severe responses and greater losses. Hamas’s “speculative behavior” decision-making is a strategy in its pursuit of political objectives, enhancement of military capabilities, and response to a complex environment. It reflects Hamas’s pursuit of changing the status quo and elevating its position, as well as the challenges of seeking survival and influence amid competition, and uncertainty. 4.2.2 Decision Motives—An Analysis Based on Prospect Theory Prospect Theory suggests that decision-makers may exhibit risk-seeking behavior when already in a state of loss. This motivation for risk-seeking drives Hamas to adopt more aggressive actions in certain decision-making scenarios, aiming to reverse unfavorable situations or achieve potential high gains, despite accompanying higher risks. Firstly, Prospect Theory indicates individuals are more sensitive to potential losses than to equivalent gains, known as loss aversion. For Hamas, the ongoing occupation, political marginalization, and the www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 37 Published by SCHOLINK INC. suffering of its people are seen as unacceptable states of loss. Facing the occupation and issues of national self-determination, the current situation may be deemed intolerable by Hamas, making any action that could break the status quo, draw international attention, or enhance its status appealing. This desire for change may drive Hamas towards risky speculative actions, such as launching rocket attacks, conducting suicide bombings, or initiating border problems, even though these actions could provoke severe responses. Thus, even if speculative actions, like launching attacks or refusing compromises, carry high risks, Hamas might see them as necessary to change the status quo and reduce long-term losses. In other words, rather than accepting a continuous unfavorable situation, Hamas prefers to take risks in hopes of changing the status quo through actions. Secondly, the setting of reference points is crucial for their decision choices. Hamas’s reference points include not only its current survival situation but also visions for the future, historical sentiments, and religious beliefs. When reality falls significantly below these reference points, Hamas might resort to extreme actions to attempt resetting the status quo, even if the chances of success are slim. Furthermore, Prospect Theory posits that decision-makers perceive probabilities nonlinearly, especially when assessing low-probability events. For Hamas, even if the chances of success for certain speculative actions are low, as long as success could bring significant political or strategic gains, they might still be overly weighted. Hamas might also weight the probabilities of potential gains based on its interpretation of various situations. If Hamas believes that international or regional powers might pressure concessions due to its actions, it might assign a higher probability weighting to military or political provocations, deciding on more aggressive actions. This nonlinear perception of probabilities could lead to an unusually high tolerance for risk by Hamas, willing to engage in a series of high-risk, high-reward speculative actions. In summary, Hamas’s decision-making for “speculative behavior” reflects its strategic considerations as a national liberation movement seeking to achieve its objectives in an extremely complex and dynamic environment. Loss aversion makes it unwilling to accept a continuous unfavorable state; strong reference points drive it to act in hopes of changing the status quo, and nonlinear perception of probabilities makes it more inclined to pursue high-risk strategies that could lead to significant changes. These factors together shape Hamas’s decision-making behavior, leading it to undertake a series of “speculative actions” in a complex and dynamic political environment. However, these “speculative actions” are not without costs. Hamas’s military actions often lead to strong responses from IDF, causing casualties and economic losses and potentially provoking international condemnation. Therefore, when deciding to take speculative actions, Hamas must weigh the complex relationship between the expected benefits of enhancing its strategic position and achieving its goals against the potential negative consequences. www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 38 Published by SCHOLINK INC. 5. Bilateral Peace-Building Strategy Recommendations 5.1 Reshaping Reference Points to Mitigate the Impact of Loss Aversion Prospect Theory highlights that people’s choices depend on their relative perception of gains and losses, rather than their absolute values. Efforts towards peace-building should aim to alter the perceptions of both parties regarding the current state, viewing peace as a means to improve the status quo. Through education, media, and direct dialogue, it’s possible to deepen the understanding of the potential benefits of peace, making it a new reference point for both sides. Due to loss aversion, both parties may prefer to maintain the status quo rather than risk seeking peace, especially when the path to peace is fraught with uncertainty. To overcome this obstacle, security measures and incentives such as economic aid, security guarantees, and international support can be offered to reduce the uncertainty and perceived risk during the transition to peace. These measures can help both sides more easily accept the initial “losses” brought by peace and focus on the long-term “gains.” 5.2 Utilizing Probability Weighting to Develop a Gradual Peace Roadmap Prospect Theory suggests that when faced with complex decisions, decision-makers tend to assign disproportionate importance to low-probability events. Peace-building strategies can leverage this psychological bias by emphasizing that even a low-probability peace success can have significant positive impacts. By highlighting the potential gains of peace success (such as international recognition, economic development, social stability), it encourages both parties to take more proactive peace actions. Additionally, decision-makers prefer to break down problems into a series of smaller choices. Therefore, creating a phased peace roadmap, with clear objectives and gains at each stage, can help both sides gradually adapt to the peace process and feel progress and benefits at each step. This gradual approach can lower the overall perception of risk, making each step towards peace seem more manageable and acceptable. 5.3 Establishing Reciprocal Mechanisms for Shared Loss Distribution Reciprocal mechanisms aim to ensure that both parties in a case can see clear benefits from the peace process. Prospect Theory points out that decision-makers are more sensitive to losses than to equivalent gains. Therefore, it’s crucial for each side to see direct and substantial benefits in the peace agreement to facilitate their acceptance and implementation of the agreement. If the decision-makers perceive that losses are fairly distributed, they might be more willing to take some risks and engage in the peace process. At the same time, peace-building can be achieved through economic aid, trade incentives, security guarantees, technical support, or cultural exchanges. The international community can promise economic assistance and development projects after the successful signing of a peace agreement, helping both sides to rebuild and develop. This creates a positive feedback loop, encouraging both parties to continue adhering to the agreement. 6. Conclusion Prospect Theory, established on an experimental basis, is a probabilistic theory that does not assume a www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 39 Published by SCHOLINK INC. priori nor employs deductive reasoning to draw conclusions, instead using an inductive method. Although it differs from the theoretical models advocated by scientific methodology, Prospect Theory still offers many noteworthy theoretical insights. In the field of international relations, especially in the study of decision-making theories using Expected Utility Theory for analysis, Prospect Theory provides a theoretical foundation for diplomatic decision preference research that differs from Rational Choice Theory and other theories. To some extent, it explains the dynamic changes in diplomatic decision-making. This paper aims to analyze the complexity of the situation in the Middle East and its multidimensional strategies for peace-building from the perspective of Prospect Theory. It elucidates the history and current state of the the situation in the Middle East, Hamas’s speculative behavior, and IDF’s hedging strategy. By examining the deep motives and psychological mechanisms behind these behaviors, we gain insight into the decision-making process of the parties. Although the path to peace between IDF and Hamas is full of challenges, a deeper understanding of the decision-making motives and preferences of both sides can enable the international community to promote peace negotiations and construction more effectively. Continuous international support, courage, and wisdom from leaders of both sides, and adaptability to changing circumstances are key factors in achieving lasting peace. Additionally, the participation and support of civil society are crucial to the peace process, providing a comprehensive driving force from grassroots to high-level efforts. In conclusion, building peace between the countries in Middle East is a long-term, complex, and dynamic process that requires relentless efforts and a shared commitment from both sides. The international community should condemn all acts of violence against civilians and call for all parties to exercise maximum restraint, firmly maintain a stance for peace and stability, and advocate for resolving disputes through dialogue and negotiations. By adopting flexible strategies, deepening mutual understanding, and continually adapting to new challenges and opportunities, achieving lasting peace in the Middle East region is both possible and a worthy goal to pursue collectively. References Hobart and William Smith Colleges. (2023). International perspectives on the Israeli-Palestinian conflict. Retrieved from https://www.hws.edu/news/2023/international-perspectives-on-the-israeli-palestinian-conflict.aspx Kekauoha, A. (2023). Navigating the fog of war: Stanford’s discussion on media coverage of the Israel-Hamas war. Stanford Report. Retrieved from https://news.stanford.edu/report/2023/12/06 Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263-291. https://doi.org/10.2307/1914185 Lin. M. W. (2006). Prospect Theory and Foreign Policy Decision-Making. Diplomatic Review: Journal of the Foreign Affairs College, 5, 7. Mark, A. T. (1994). A History of the Israeli-Palestinian Conflict. www.scholink.org/ojs/index.php/ape Advances in Politics and Economics Vol. 7, No. 2, 2024 40 Published by SCHOLINK INC. John Dugard, J. (2013). International Law and the Israeli-Palestinian Conflict: A Rights-Based Approach to Middle East Peace. Johan Galtung, J. (1996). Peace by Peaceful Means: Peace and Conflict, Development and Civilization. https://doi.org/10.4135/9781446221631 Yao, H. N. (2017). Interpretation of the Reasons for the Long-term Dilemma of the Palestine-Israel Security Relations. West Asia and Africa, 05, 135-154+160. Zhang, Q. (2023). “The Year-End” Approaches, Where Are the Two Hot Wars Heading?. Liberation Daily, 007.