In the 40’s and early 50’ two decision theories were proposed and have since dominated the scene of the fascinating field of decision-making. In 1944 – when von Neumann and Morgenstern showed that if preferences are consistent with a set of axioms then it is possible to represent these...

In a discrete setting, we develop a model for pricing a contingent claim. Since the presence of hedging opportunities influences the price of a contingent claim, first we introduce the optimal hedging strategy assuming a contingent claim has been issued: a strategy implemented by investing the...

We propose a new theory of choice between lotteries, which combines an 'economic’ view of decision making - based on a rational, though incomplete, ordering - with a 'psychological’ view - based on heuristics. This theory can explain observed violations of EU theory, namely all cyclical...

This paper studies a target-based procedure to rank lotteries that is normatively and observationally equivalent to the expected utility model. In view of this equivalence, the traditional utility-based language for decision making may be substituted with an alternative target-based language....

This paper describes a parametric family of utility functions for decision analysis. The parameterization is obtained by embedding the HARA class in a four-parameter representation for the risk aversion function. The resulting utility functions have only four shapes: concave, convex, S-shaped,...

This paper advances an interpretation of Von Neumann–Morgenstern’s expected utility model for preferences over lotteries which does not require the notion of a cardinal utility over prizes and can be phrased entirely in the language of probability. According to it, the expected utility of a...

Ideal economics? A “non-ideal” economics approach has been proposed, which considers the possibility of arrangement infringements. It gives promises for both solving fundamental problems of economic theory and creation of new directions and fields of research. The approach application in...

We study search behavior in a generalized "secretary problem" environment in which consumers search sequentially for the best alternative from a known and finite set of multi-attribute alternatives. In contrast to most previous studies, we make no distributional assumptions about the quality of...

This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the theoretical prediction that, if bidders are aware of the possibility of...

Tacit coordination is studied experimentally in a class of iterated market entry games with a relatively small number of potential entrants (n = 6), symmetric players, and fixed entry fees. These games are intended to simulate a situation where a newly emergent market opportunity may be...