Since business activities are generally subject to uncertainties, dealing with risk is essential. Principals are generally assumed to maximize their expected value and therefore act in a risk-neutral manner by diversifying their portfolio. Agents, however, often deviate from maximizing their...

The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory...

Companies are increasingly adopting Artificial Intelligence (AI) today. Recently however debates started over the risk of human cognitive biases being replicated (and scaled) by AI. Research on biases in AI predicting consumer choice is incipient and focuses on observable biases. We provide a...

Expected utility theory (EUT) is currently the standard framework which formally defines rational decision-making under risky conditions. EUT uses a theoretical device called von Neumann-Morgenstern utility function, where concepts of function and random variable are employed in their...

We study risk taking in a panel of subjects in Wuhan, China - before, during the COVID-19 crisis, and after the country reopened. Subjects in our sample traveled for semester break in January, generating variation in exposure to the virus and quarantine in Wuhan. Higher exposure leads subjects...

This online appendix (OA) contains proofs and additional results to the paper Ebert and Karehnke (2021) “Skewness Preferences in Choice under Risk.” Online Appendix OA.1 shows the proofs of the results in the main text. Online Appendix OA.2 studies behavioral implications of the orders of...

We investigated the effect of large changes in financial incentives on the process of decision-making by measuring autonomic arousal and visual attention during an incentivized lottery-choice task. High real stakes were accompanied by increased risk aversion and physiological arousal, and by...

Media reports say that high earners and syndicates buy lottery tickets in bulk. Experimental evidence shows that agents aggressively bid in auctions and contests. Do people try to trade-off the probability of winning with other basic risk dimensions (for example, cost) to achieve a subjective...

We use probability-matching variations on Ellsberg’s single-urn experiment to assess three questions: (1) How sensitive are ambiguity attitudes to changes from a gain to a loss frame? (2) How sensitive are ambiguity attitudes to making ambiguity easier to recognize? (3) What is the relation...

Based on recent discoveries in economics, neuroscience, and psychology, we hypothesize that pure exposure to high-payoff or low-payoff gambles can change people’s subsequent reported valuations of gambles and confirm this hypothesis in a laboratory experiment. In particular, the same...