Subjective self-assessment and decision making under uncertainty

This thesis deals with standard and behavioral perspectives on the role of expectations in individual decision making. Chapter 2 considers the influence of subjective expectations on insurance demand. The analysis takes a standard approach by arguing that the subjective risk assessment of the insurant contains elements of private information which makes it superior to the objective risk assessment made by the insurer. Exploiting private information in decision making is fully consistent with the rationality criterion. In contrast, Chapters 3, 4 and 5 take a behavioral approach to decisions under uncertainty and subjective assessments. Chapter 3 experimentally investigates whether risk preferences deviate from the assumptions of expected utility theory and the basic rationality requirement of consistency with first-order stochastic dominance. Chapters 4 and 5 consider the behavioral implications of deviations of subjective from objective assessments which are caused by a systematic bias instead of a private information advantage. Contradicting the rationality postulate and ruled out within the standard framework, the occurrence of systematic errors in subjective belief formation prevents individuals from efficient decision-making