This paper studies the problem of optimal path selection in a directed network by decision makers that have an intrinsic distaste for evaluating too many options. We propose a recursive logit model that incorporates choice aversion along the lines introduced by Fudenberg and Strzalecki (2015)....

In this paper, we analyze equilibrium in incomplete markets of random endowments by adopting utility indifference pricing and utility-based pricing. Addressing model uncertainty, we also consider agents who adopt max/min expected utility and a risk management policy. Using this framework, we...

Conventional wisdom suggests that optimism should be positively associated with risk taking. However, this has hardly been directly tested in the laboratory. In this paper, we report an experiment regarding risk perception and risk taking. Our data supports the hypothesis that two sufficient...

This paper uses four different disappointment models to examine the production decision of the competitive firm under uncertainty when the firm is not only risk-averse, but also disappointment-averse. We show the conditions under which the disappointment-averse firm will produce less than its...

The paper incorporates qualitative differences of probabilistic beliefs into a rational (or normatively motivated) decision framework. Probabilistic beliefs can range from objective probabilities to pure guesstimates. The decision maker in the present model takes into account his confidence in...

This paper compares Bayesian decision theory with robust decision theory where the decision maker optimizes with respect to the worst state realization. For a class of robust decision problems there exists a sequence of Bayesian decision problems whose solution converges towards the robust...