Experiments in decision-making under risk and uncertainty: thinking outside the box

This paper surveys a selection of recent research results which use laboratory methods to contribute to our understanding of risk and uncertainty in environments which are of particular interest to managerial decision-making. The first set of experimental results addresses issues related to insuring against risky outcomes and the roles of the degree of risk and the complexity of risk. Laboratory results related to models of job search are then reviewed, followed by applications of laboratory methods to evaluating models of investment decisions. Finally, issues related to markets for inputs (petroleum, water, electricity) are presented. The necessarily interactive role of theory development, laboratory experimentation and field observation is discussed. © 1998 John Wiley & Sons, Ltd.