In this paper we offer an alternative framework for examining why risk matters in the decisions of economic agents, and how the agent's risk attitude affects his decisions. This 'Threshold Theory' framework is based on a real options approach and the observation that in many situations an agent...

In this paper we offer an alternative framework for examining why risk matters in the decisions of economic agents, and how the agent’s risk attitude affects his decisions. This “Threshold Theory” framework is based on a real options approach and the observation that in many situations an...