We conduct a contest experiment to study if spread seeking and effort can be managed in a situation where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory, we...

The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in mathematical challenges: simple extensions and...

Motivated by individuals' emotional response to risk at different time horizons, we model an 'anxious' agent - one who is more risk averse with respect to imminent risks than distant risks. Such preferences describe well-documented features of 1) individual behavior, 2) equilibrium prices, and...

We derive a simplified version of the model of Fudenberg and Levine [2006, 2011] and show how this approximate model is useful in explaining choice under risk. We show that in the simple case of three outcomes, the model can generate indifference curves that “fan out” in the Marshack-Machina...

We define asset manager career risk as the risk that asset owners terminate an existing manager due to an extended period of underperformance relative to a benchmark or peer group even though the manager has skill (defined here as positive information ratio). We show that myopic loss aversion...

We give a full characterization of the continuation and stopping regions of optimal stopping of diffusions. We consider separately the case of a naive agent who is unaware of the possible time inconsistency in her behavior and the case of a sophisticated agent who is fully aware of such an...

How does an individual's position within a social distribution influence their desire to take risk? Reference-dependent loss aversion (Kahneman and Tversky, 1979; Koszegi and Rabin, 2006, 2007) adapted to a social setting, suggests that individuals may find risk more appealing when they are doing...

This paper focuses on determining the factors influencing investors' risk-taking through empirical evidence from Vietnam. This study investigates risk perception, expected return and herding behavior, and other determinants such as historical volatility and subjective financial risk attitude;...

We model an ‘anxious' agent as one who is more risk averse with respect to imminent risks than with respect to distant risks. Based on a utility function that captures individual subjects' behavior in experiments, we provide a tractable theory relaxing the restriction of constant risk aversion...

Media reports say that high earners and syndicates buy lottery tickets in bulk. Experimental evidence shows that agents aggressively bid in auctions and contests. Do people try to trade-off the probability of winning with other basic risk dimensions (for example, cost) to achieve a subjective...