Economists attribute many common behaviors to risk aversion and frequently focus on how wealth moderates risk preferences. This paper highlights a problem associated with empirical tests of the relationship between wealth and risk aversion that can arise when the probabilities individuals face...

An experiment was conducted to investigate the interaction between consumers’ past eating behaviors, risk perceptions and future information processing procedure. In the study, participants were required to choose whether or not to eat chicken that was potentially be tainted with Avian...

Entrepreneurship means making discrete changes in livelihood activities that involve substantial risks to income. While the rewards may be substantial, transactions costs may make decisions irreversible. This paper draws a comparison between entrepreneurship and technology adoption. Adopting a...

Recently, Rabin criticized the use of diminishing marginal utility in explaining risk aversion in small gambles with a mathematical theorem, which compares revealed risk averting behavior in small gambles to the risk behavior implied by expected utility theory in somewhat larger gambles, using...

Loss aversion has become the dominant alternative to expected utility theory for modeling choice under uncertainty. The setting of the base payment in contracts provides an interesting application of referenced based decision theory. The impact of loss aversion on contract structure depends...

Economists attribute many common behaviors to risk aversion and frequently focus on how wealth moderates risk preferences. This paper highlights a problem associated with empirical tests of the relationship between wealth and risk aversion that can arise when the probabilities individuals face...

Previous studies have found underestimation of risk, or overconfidence, to be pervasive. In this paper, we model overconfidence as a reduction in perceived variance. We generalize the analysis of Sandmo and examine the effects of competition on firms displaying overconfidence. Cases for both...

Loss aversion has become the dominant alternative to expected utility theory for modeling choice under uncertainty. The setting of the base payment in contracts provides an interesting application of referenced based decision theory. The impact of loss aversion on contract structure depends...