This chapter is concerned with the empirical exploration and experimental investigation of the numerous theories of decision making under uncertainty proposed in the earlier chapters of this handbook. This chapter begins with static theories of behavior under risk ; then we look at dynamic...

The phenomena of ambiguity and ambiguity aversion , introduced in Daniel Ellsberg’s seminal 1961 article, are ubiquitous in the real world and violate both the key rationality axioms and classic models of choice under uncertainty. In particular, they violate the hypothesis that individuals’...

Although expected utility (EU) theory is a powerful tool for the analysis of decision under risk, it has long been known that individual behavior, in both experimental and market settings, deviates from the predictions of simple EU models. These violations of EU predictions were largely...

Economic and insured losses from natural catastrophes have increased significantly in recent years and are challenging the way catastrophe risk insurance markets operate today. This chapter focuses on how insurance in combination with other policy tools can reduce losses from natural disasters...

Environmental risks may comprise the most important policy-related application of the economics of risk and uncertainty. Many biases in risk assessment and regulation, such as the conservatism bias in risk assessment and the stringent regulation of synthetic chemicals, reflect a form of...