I show that stochastic contracts generate powerful incentives when agents suffer from probability distortion. When implementing these contracts, the principal can target probability distortions in order to inflate the agent's perceived benefits of exerting high levels of effort. This novel...

Experience goods are those where the utility received is not known until consumed. The purchase can be viewed as a lottery. Consequently, risk preferences should affect willingness to pay and the price. Data from panels of experts rating cigars is used to test this assertion. For inexpensive...

One fundamental assumption often made in the literature on unawareness is that risk preferences are invariant to changes of awareness. We study how exposure to unawareness affects choices under risk. Participants in our experiment choose repeatedly between varying sure outcomes and a lottery in...

Using an experiment with incentivized decisions of groups in the economics laboratory, I investigate the effect of group diversity on group risk taking. I measure econometrically the effects of various aspects of subjects' diversity: nationality, language, university degree and gender. I find...

One fundamental assumption often made in the literature on unawareness is that risk preferences are invariant to changes of awareness. We study how exposure to unawareness affects choices under risk. Participants in our experiment choose repeatedly between varying sure outcomes and a lottery in...

We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion, utilizing an asset integration protocol designed to ensure that a loss of cash provided by the experimenter is viewed as a real loss by experimental participants. Our experimental...