We examine the risky choices of contestants in the popular TV game show “Deal or No Deal” and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion...

This is the first book to investigate the pessimistic and optimistic perceptions of the future and their economic consequences, based on sound mathematical foundations. The book focuses on fundamental uncertainty (Knightian uncertainty), where the probability distribution governing uncertainty...

A choice problem is risky (respectively ambiguous) if the decision maker is choosing between probability distributions (respectively sets of probability distributions) over utility relevant consequences. We provide an axiomatic foundation for and a representation of continuous linear preferences...