The aim of this paper is to propose a model of decision-making for lotteries. Lottery qualities are the key concepts of the theory. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the...

What determines risk attraction or aversion? We experimentally examine three factors: the gain-loss dichotomy, the probabilities (0.2 vs. 0.8), and the money at risk (7 amounts). We find that the majority display risk attraction for small amounts of money, and risk aversion for larger amounts....

We examine the risks and management of natural disasters. A benefit-cost framework focuses attention on (1) designing control structures, such as dams and levees, and mitigation policies, such as construction standards, to protect lives and property against small and medium, rather than large...

The central idea of Disappointment theory is that an individual forms an expectation about a risky alternative, and may experience disappointment if the outcome eventually obtained falls short of the expectation. We abandon the hypothesis of a well-defined prior expectation: disappointment...

Whereas both the Allais paradox, the first empirical challenge of the classical rationality assumptions, and learning have been the focus of many experimental investigations, no experimental study exists today into learning in the pure context of the Allais paradox. This paper presents such a...

Hurricane Katrina did massive damage because New Orleans and the Gulf Coast were not appropriately protected. Wherever natural disasters threaten, the government—in its traditional role as public goods provider—must decide what level of protection to provide to an area. It does so by...

It is a well-established fact that many people view the prospect of premature death by some causes with considerably more disquiet or “dread” than death by other causes. It is equally clear that for most people their personal risk of death by a given cause is also a matter of serious...

The paper reports on an experiment testing whether agents perceive correctly the lethal risks they face personally. The results suggest that subjects exhibit comparable biases when making predictions for their own-age-cohort, or for the entire population (i.e. agents overestimate rare risks, and...

The offset hypothesis predicts consumers adapt to innovations that improve safety by becoming less vigilant about safety. Previous tests have used aggregate data that may confound the effect of a safety policy with those consumers who are most affected by it. We test the hypothesis using...

Few theoretically-consistent empirical models addressing the relationship between ambiguity, risk, and preferences for health and safety exist. To fill this gap, we propose a theoretical non-expected-utility model (NEUM) that is relatively easy to estimate using an interval-data model. The NEUM...