We investigate consumers’ preference for scarcity in a real market with large stakes. We find evidence that the elasticity of demand for scarcity is constant across prices ranging from $50 to nearly $4 million, that preference for scarcity follows a power law, and that it explains 95% of the...

We study a representative agent that separates beliefs, ambiguity, and ambiguity attitude and nests benchmark models of expected utility preferences and ambiguity aversion. Within that framework, matching four market moments (the risk-free rate, equity premium, variance risk premium, and...

We extend and apply salience theory to choices over lotteries with multiple dimensions, such as insurance plans with deductibles and premiums, or monetary and non-monetary rewards. This extension can explain empirically observed dominated choices with large welfare costs to consumers (the...