In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This paper provides an axiomatization of a new specification of cumulative prospect theory, termed endogenous prospect...

Individuals exhibit a randomization preference if they prefer random mixtures of two bets to each of the involved bets. Such preferences provide the foundation of various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse...

The St. Petersburg Paradox is one of the oldest violations of expected utility theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility. This paper provides experimental results showing that neither risk attitudes nor...