A fixed budget must be allocated to a finite number of different projects with uncertain outputs. The expected marginal productivity of capital in a project first increases then decreases with the amount of capital invested. Such behavior is common when output is a probability (of escaping...

The U.S. Food and Drug Administration (FDA) balances risks and benefits before approving pharmaceuticals, as rationality would require. But powerful behavioral biases that lead to the mishandling of uncertainty also influence its approval process. The FDA places inordinate emphasis on errors of...