Ample empirical and experimental evidence documents that individuals place greater weight on information gained through personal experience -- a phenomenon that Tversky and Kahneman (1982) call availability bias. I embed this bias in an overlapping generations equilibrium model in which the...

This paper experimentally investigates how emotions are associated with option prices and risk perception. Using a binary lottery, we find evidence that the emotion 'surprise' plays a significant role in the negative correlation between lottery returns and estimates of the price of a put option....