The favorite-longshot bias describes the longstanding empirical regularity that betting odds provide biased estimates of the probability of a horse winning - longshots are overbet, while favorites are underbet. Neoclassical explanations of this phenomenon focus on rational gamblers who overbet...

The theory of expected utility maximization (EUM) proposed by Bernoulli explains risk aversion as a consequence of diminishing marginal utility of wealth. However, observed choices between risky lotteries are difficult to reconcile with EUM: for example, in the laboratory, subjects' responses on...

We consider discounted-utility models with a reference stream of outcomes. We provide a common framework for the main empirically supported discount functions in terms of three underlying functions: The delay, speedup and generating functions. Each of the delay and speedup functions can be...

Loss aversion is one of the most widely used concepts in behavioral economics. We conduct a large-scale interdisciplinary meta-analysis, to systematically accumulate knowledge from numerous empirical estimates of the loss aversion coefficient reported during the past couple of decades. We...

The evidence shows source-dependent entitlement to income sources and individuals are reluctant to part with income they feel more entitled to, e.g., earned labor income. Taxpayers may also be more reluctant to part with tax payments (evade more) from income sources they feel more entitled to- a...

While many puzzles in static choices under risk can be explained by a preference for positive and an aversion toward negative skewness, little is known about the implications of such skewness preferences for decision making in dynamic problems. Indeed, skewness preferences might play an even...

In an experiment that elicits subjects' willingness to pay (WTP) for the outcome of a lottery, we confirm the fourfold pattern of risk attitudes described by Kahneman and Tversky. In addition, we document a systematic effect of stake sizes on the magnitude and sign of the relative risk premium,...

We consider income-source-dependent tax evasion and show that this is a generalization of the well-known endowment effect. We show that loss aversion, moral costs, mental accounting, and risk preferences play a key role in explaining key features of source-dependent tax evasion. We provide...

Loss aversion, risk aversion, and the probability weighting function (PWF) are three central concepts in explaining decisionmaking under risk. I examine interlinkages between these concepts in a model of decisionmaking that allows for loss averse/tolerant stochastic reference dependence and...

This paper argues that the "Economics of Crime" concentrates too much on punishment as a policy to fight crime, which is unwise for several reasons. There are important instances in which punishment simply cannot reduce crime. Several feasible alternatives to punishment exist, such as offering...