We present the first calibration of quantum decision theory (QDT) to an empirical data set. The data comprise 91 choices between two lotteries (two "prospects") presented in 91 random pairs made by 142 subjects offered at two separated times. First, we quantitatively account for the fraction of...

We derive critical values for the violation area in Nth order Almost Stochastic Dominance based on the Nth degree coefficient of relative risk aversion of reasonable utility functions. Our critical values are consistent with existing experimental estimates but apply for a broader range of choice...

We investigate what it means for one act to be more ambiguous than another. The question is evidently analogous to asking what makes one prospect riskier than another, but beliefs are neither objective nor representable by a unique probability. Our starting point is an abstract class of...

We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning...

This paper analyzes the problem faced by a risk-averse firm considering how much to invest in a risky project. The firm receives a signal about the value of the project. We derive necessary and sufficient conditions on the signal distribution such that (i) the agent's investment is nondecreasing...

We propose a method to measure the intensity of risk aversion, prudence (downside risk aversion) and temperance (outer risk aversion) in experiments. Higher-order risk compensations are defined within the proper risk apportionment model of Eeckhoudt and Schlesinger [American Economic Review, 96...

Social preference models were originally constructed to explain two things: why people spend money to affect the earnings of others and why the income of others influences reported happiness. We test these models in a novel experimental situation where participants face a risky decision that...

We propose an experimental method to test individuals for prudence (i.e. downside risk aversion) outside the expected utility framework. Our method relies on a novel representation of compound lotteries which allows for a systematic parameterization that captures the full generality of prudence....

Loss aversion can occur in riskless and risky choices. Yet, there is no evidence whether people who are loss averse in riskless choices are also loss averse in risky choices. We measure individual-level loss aversion in riskless choices in an endowment effect experiment by eliciting both WTA and...