We examine the risky choices of contestants in the popular TV game show “Deal or No Deal” and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion...

We propose a simple, parameter‐free method that, for the first time, makes it possible to completely observe Tversky and Kahneman's (1992) prospect theory. While methods existed to measure event weighting and the utility for gains and losses separately, there was no method to measure loss...

Loss aversion has been shown to be an important driver of people’s investment decisions. Encouraged by regulators, financial institutions are in search of ways to incorporate clients’ loss aversion in their risk classifications. The most critical obstacle appears to be the lack of a valid...