The term 'money illusion' refers to a tendency to think in terms of nominal rather than real monetary values. Money illusion has significant implications for economic theory, yet it implies a lack of rationality that is alien to economists. This paper reviews survey questions regarding people's...

Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. The authors present a reference-dependent theory of consumer choice, which explains such effects by a deformation of indifference...

Decisions under uncertainty depend not only on the degree of uncertainty but also on its source, as illustrated by Daniel Ellsberg's (1961) observation of ambiguity aversion. In this article, the authors propose the comparative ignorance hypothesis, according to which ambiguity aversion is...