A probability weighting function w(p) is a prominent feature of several nonexpected utility theories, including prospect theory and rank-dependent models. Empirical estimates indicate that w(p) is regressive with respect to the diagonal (w(p) p for small p, and w(p) p for large p), s-shaped...

In six experiments we show that initial valuations of familiar products and simple hedonic experiences are strongly influenced by arbitrary "anchors" (sometimes derived from a person's social security number). Because subsequent valuations are also coherent with respect to salient differences in...

Research on decision-making under uncertainty has been strongly influenced.by the documentation of numerous expected utility anomalies--behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the...

This paper investigates the effects of supervision and incentives on subjects’ performance and cheating behavior in a real effort task. With a sample of 540 participants in three different experiments, we investigated the interaction between motivation and monetary and social rewards, with and...

We propose that the temporal dimension is fragile in that choices are insufficiently sensitive to it, and second, such sensitivity as exists is exceptionally malleable, unlike other dimensions such as money, which are attended by default. To test this, we axiomatize a "constant-sensitivity"...

In the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone. The reality of consumer hedonics is different. When people make purchases, they often experience an...

Neuroeconomics uses knowledge about brain mechanisms to inform economic theory. It opens up the "black box" of the brain, much as organizational economics opened up the theory of the firm. Neuroscientists use many tools-including brain imaging, behavior of patients with brain damage, animal...

In this paper, we develop a theory of individual choice called melioration, which implies that choices distributed over a period of time may be reliably and predictably suboptimal, in terms of the person's own preferences. Consider some typical examples of distributed choices: the expenditure...

We consider the problem of when to deliver the contract payoff, in a continuous-time principal-agent setting, in which the agent's effort is unobservable. The principal can design contracts of a simple form that induce the agent to ask for the payoff at the time of the principal's choosing. The...

We develop a new theory of delegated investment whereby managers compete in terms of composition of the portfolios they promise to acquire. We study the resulting asset pricing in the inter-manager market. We incentivize investors so that we obtain sharp predictions. Managers are paid a fixed...