We analyze a dynamic pricing problem where consumer's purchase decisions are a ected by representative past prices, summarized in a reference price. We propose a new, behaviorally motivated reference price mechanism, based on the peak-end memory model proposed by Kahneman et al. (1993). Speci...

This paper illustrates the importance of density forecasting in portfolio decision making involving bonds of different maturities. The forecast performance of an atheoretic and a theory informed model of bond returns is evaluated. The decision making environment is fully described for an...

Evidence shows that (i) people overweight low probabilities and underweight high probabilities, but (ii) ignore events of extremely low probability and treat extremely high probability events as certain. The main alternative decision theories, rank dependent utility (RDU) and cumulative prospect...