This study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes....

We specify a stochastic economy-climate model, adapting Nordhaus' deterministic economy-climate model by allowing for Weitzman-type stochasticity. We show that, under expected power utility, the model is fragile to heavy-tailed distributional assumptions and we derive necessary and sufficient...

Dagsvik (2008) has recently extended Debreu's (1958) famous representation theorem for stochastic choice to the domain of lotteries. Dagsvik provides conditions under which there exists a linear utility function such that the probabilityof choosing one alternative over another is represented by...

Charness et al. (2007b) have shown that group membership has a strong effect on individual decisions in strategic games when group membership is salient through payoff commonality. In this comment I show that their findings also apply to non-strategic decisions, even when no outgroup exists, and...

We introduce a new and complete ordering of prospects that is consistent with stochastic dominance (SD). Featuring loss aversion and skewness preference, it mitigates the low discriminatory power of SD and circumvents implementation difficulties associated with third order SD. To highlight its...