In this experiment, we test whether the Domar-Musgrave model accurately predicts investor behavior in its paradigmatic setting. Our results indicate that investors only scale up their investments in risky assets to the extent predicted by the model when tax rates are relatively low. Moreover, we...

In this paper, we consider the experiments that have been conducted to date on the effects of income taxes on the willingness of investors to take on risk. Interestingly, different experiments yield different conclusions about the effect. Some indicate income taxes increase risk-taking, while...

Human decision making under risk and uncertainty may depend on individual involvement in the outcome-generating process. Expected utility theory is silent on this issue. Prospect theory in its current form offers little, if any, prediction of how or why involvement in a process should matter,...