Whereas people are typically thought to be better off with more choices, studies show that they often prefer to choose from small as opposed to large sets of alternatives. We propose that satisfaction from choice is an inverted U-shaped function of the number of alternatives. This proposition is...

The mathematical representation of Brunswik's lens model has been used extensively to study human judgment and provides a unique opportunity to conduct a meta-analysis of studies that covers roughly five decades. Specifically, we analyze statistics of the lens model equation (Tucker, 1964)...

The experiential sampling method (ESM) was used to collect data from 74 part-time students who described and assessed the risks involved in their current activities when interrupted at random moments by text messages. The major categories of perceived risk were short-term in nature and involved...

Research on judgment and decision making presents a confusing picture of human abilities. For example, much research has emphasized the dysfunctional aspects of judgmental heuristics, and yet, other findings suggest that these can be highly effective. A further line of research has modeled...

This chapter, originally written as a consequence of the terrorist attacks of September 11, 2001, provides an elementary introduction to the concepts of risk and insurance. The main difficulty lies in assessing probabilities to judge whether premiums are appropriate and, in particular, for...

We investigate the impact of various audit schemes on the provision of public goods, when contributing less than the average of the other group members is centrally sanctioned and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being...

We investigate the impact of various audit schemes on the future provision of public goods, when contributing less than the average of the group is sanctioned exogenously and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being...

The outcomes of many activities depend upon both skill and luck. We analyze stock analysts' forecasts of companies' earnings per share under market conditions that vary in volatility and thus imply different levels of luck in outcomes. Noting that making forecasts that deviate widely from the...

Setting CEO compensation is a critical but difficult task. Thus, given the lack of transparency that frequently accompanies such decisions, it is important to know whether it is subject to bias. We document the presence of illusory correlation in CEO compensation. By this we mean the use of...

We investigate the impact of various audit schemes on the provision of public goods, when contributing less than the average of the other group members is centrally sanctioned and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being...