Economist Frank H. Knight (1885--1972) is commonly credited with defining the distinction between decisions under ``risk'' (known chance) and decisions under ``uncertainty'' (unmeasurable probability) in his 1921 book Risk, Uncertainty and Profit. A closer reading of Knight (1921) reveals a host...

This study extends the literature on portfolio choice under prospect theory preferences by introducing a two-period life cycle model, where the household decides on optimal consumption and investment in a portfolio with one risk-free and one risky asset. The optimal solution depends primarily on...

The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss...