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Daniel Kahneman, often in collaboration with Amos Tversky, developed foundational frameworks for understanding human decision-making. Building on that tradition, this article proposes that individuals’ ex ante assessments of the likelihood of good and bad outcomes serve as reference points that shape the ex post utility of lottery outcomes. In prospect theory, prior holdings act as reference points for evaluating outcomes—but probabilities themselves play no such role. This article introduces Managed Expectations Theory, which rests on two core hypotheses: 1. Reference Point Hypothesis: Ex ante probabilities serve as reference points for ex post utility. Specifically, more pessimistic expectations about uncertain outcomes enhance ex post utility, regardless of whether the outcome turns out to be good or bad. Four experiments, using a nationally representative adult sample of over 1,000 participants, strongly support this hypothesis. Lower [higher] ex ante likelihoods are associated with greater ex post utility for good [bad] outcomes. 2. Created Likelihoods Hypothesis: Recognizing that likelihood assessments act as reference points, individuals deliberately manage these assessments to be more pessimistic than an objective or statistical “outside view”—in order to boost their ex post utilities. Supporting this conjecture, the good outcomes participants labeled as “likely” occurred far more often than the bad outcomes they labeled as “likely.” These created likelihoods help explain a central feature of prospect theory’s probability weighting function: the underestimation of high-probability good events and the overestimation of low-probability bad events.