In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the same distribution of possible monetary...

Economic research offers two traditional ways of analyzing decision making under risk. One option is to compare the goodness of fit of different decision theories using the same model of stochastic choice. An alternative way is to vary models of stochastic choice combining them with only one or...

In binary choice between discrete outcome lotteries, an individual may prefer lottery L1 to lottery L2 when the probability that L1 delivers a better outcome than L2 is higher than the probability that L2 delivers a better outcome than L1. Such a preference can be rationalized by three standard...

This paper investigates the effectiveness of two instruments designed to defer termination in the centipede game: an insurance against termination by the opponent, and an option to offer the opponent a bonus for not terminating the game. The rational prediction in both cases is passing until...

This paper proposes a new model that explains the violations of expected utility theory through the role of random errors. The paper analyzes decision making under risk when individuals make random errors when they compute expected utilities. Errors are drawn from the normal distribution, which...

This paper presents an axiomatic model of probabilistic choice under risk. In this model, when it comes to choosing one lottery over another, each alternative has a chance of being selected, unless one lottery stochastically dominates the other. An individual behaves as if he compares lotteries...

An individual makes random errors when evaluating the expected utility of a risky lottery. Errors are symmetrically distributed around zero as long as an individual does not make transparent mistakes such as choosing a risky lottery over its highest possible outcome for certain. This stochastic...

There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish...

This paper describes individuals' perceptions and normative valuations of executive compensation using comparable survey data for fifteen OECD member countries. An overwhelming majority of individuals (more than 90%) believes that top executives earn more than they actually deserve. However,...

This paper describes individuals' inequality perceptions, distributional norms, and redistributive preferences in a panel of OECD countries, primarily focusing on the association between these subjective measures and the effective level of inequality and redistribution. Not surprisingly, the...