Considerable research demonstrates a “compromise effect” showing preference for “middle” options. Yet, in the context of bundles, the “middle” option in a choice set can be composed in multiple ways. First, a bundle may include only purely moderate options (e.g., individual stocks...

The purpose of this paper is to examine whether people treat all forms of uncertainty in the same way. Studies investigating known-risk gambles and ambiguous gambles have systematically used the urn context. Little systematic research has investigated differences in expressed attitude as a...

In confidence theory, the decision maker relies on statistical regularities from the economic environment to adopt prior beliefs about the probabilities stated on a lottery. Following the confidence principle, by which the weight of the prior in Bayesian inference is proportional to the...

We propose a model of instrumental belief choice under loss aversion. When new information arrives, an agent is prompted to abandon her prior. However, potential posteriors may induce her to take actions that generate a lower utility in some states than actions induced by her prior. These losses...

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...

Preferences over risky alternatives can be elicited by different methods, including direct pairwise choices and willingness-to-accept valuations. The results are frequently at odds, casting doubts on the foundations of economics. We develop a stochastic choice model predicting when...