Global environmental phenomena like climate change, major extinction events or flutype pandemics can have catastrophic consequences. By properly assessing the outcomes involved – especially those concerning human life – economic theory of choice under uncertainty is expected to help people...

This article studies decisions made under conditions of fear, when a catastrophic outcome is introduced in a lottery. It reports on experimental results and seeks to compare the predictions of the expected utility (EU) framework with those of a new axiomatic treatment of choice under uncertainty...