We propose a new model of choice under repeated exposure to gambles. In it, the agent may come to choose a negative expected value, negative skew gamble, due to a behavioral bias that has a neurobiological foundation. We document evidence for the model using a combination of laboratory and field...

How do people record information about the outcomes they observe in their environment? Building on a well-established neuroscientific framework, we propose a model in which people are hampered in their perception of outcomes that they expect to seldom encounter. We provide experimental evidence...

How do economic agents perceive risk? We address this question through the neurosciencetheory of adaptive normalization, which predicts that after prolonged exposure to highvolatility, people perceive moderate volatility as lower than the actual level (and vice versa)due to adaptation to the...

In a series of controlled laboratory experiments, we provide evidence for "Craving by Design" (CbD) hypothesis, where people knowingly expose themselves to negative tail risk due to craving for monetary gains. We then document the "cheap call selling anomaly:" selling calls priced below $1 has...

How do people record information about the economic outcomes they observe in their environment? Building on a well-established neuroscientific framework, we propose a model in which people are not attuned to making distinctions between realized outcomes that they seldom expect to encounter. We...

People often expose themselves to negative tail risk by taking on losing bets in which randomly-occurring major losses eradicate all previous gains. Why is this? Here I present evidence from a collection of laboratory experiments aimed at testing several plausible causal explanations.The...

How do people cope with tail risk? In a lab experiment that removed informational and incentive confounds, subjects overwhelmingly behaved like Bayesian learners. The results of simulations further revealed that if one is to survive under tail risk, one needs to follow the Bayesian approach, as...