In economic analyses of asymmetric information, better-informed agents are assumed capable of reproducing the judgments of less-informed agents. The authors discuss a systematic violation of this assumption that they call the "curse of knowledge." Better-informed agents are unable to ignore...

Once they have observed information, hindsight-biased agents fail to remember how ignorant they were initially; "they knew it all along." We formulate a theoretical model of this bias, providing a foundation for empirical measures and implying that hindsight-biased agents learning about...

Multiattribute utility theory requires a specific relation between the range of outcomes of each attribute and the weight for that attribute. The greater the range, the greater the weight has to be. Experimental results show that subjects do not adjust their judgments properly if the range is...

We investigate whether loan growth affects the riskiness of individual banks in 16 major countries. Using Bankscope data from more than 16,000 individual banks during 1997-2007, we test three hypotheses on the relation between abnormal loan growth and asset risk, bank profitability, and bank...

Reference-dependent preferences have been well accepted in decision sciences, experimental economics, behavioral finance, and marketing. However, we still know very little about how decision makers form and update their reference points given a sequence of information. Our paper provides some...

This study compares time preference in the cases of certainty and risk. We analyze both matching and choice behavior. We find that violations of the stationarity axiom are restricted to matching behavior, both for certainty and risk. We also compare the discounting of certain and risky outcomes...