Related papers: Outside options and risk attitude
This study investigates the impact of loss-framing and individual risk attitude on willingness- to purchase insurance products utilizing a game-like interface as choice architecture. The application presents events as experienced in real…
A temporally abstract action, or an option, is specified by a policy and a termination condition: the policy guides option behavior, and the termination condition roughly determines its length. Generally, learning with longer options (like…
We show that under plausible levels of background risk, no theory of choice under risk -- such as expected utility theory, prospect theory, or rank dependent utility -- can simultaneously satisfy the following three economic postulates: (i)…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We study the problem of a planner who resolves risk-return trade-offs - like financial investment decisions - on behalf of a collective of agents with heterogeneous risk preferences. The planner's objective is a two-stage utility functional…
Human behavior is a dynamic process that evolves with experience. Understanding the evolution of individual's risk propensity is critical to design public health interventions to propitiate the adoption of better biosecurity protocols and…
We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
This paper analyses how risk-taking behaviour and preferences over consumption rank can emerge as a neutrally stable equilibrium when individuals face an anti-coordination task. If in an otherwise homogeneous society information about…
We examine how career concerns influence the behavior and mobility of financial advisers. Drawing on a uniquely comprehensive matched panel that combines employer-employee data with a longstanding national ranking, our study tests…
I revisit the standard moral-hazard model, in which an agent's preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the…
Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to…
A principal hires an agent to acquire soft information about an unknown state. Even though neither how the agent learns nor what the agent discovers are contractible, we show the principal is unconstrained as to what information the agent…
We investigate a group choice problem of agents pursuing social status. We assume heterogeneous agents want to signal their private information (ability, income, patience, altruism, etc.) to others, facing tradeoff between "outside status"…
We study the relationship between national culture and the disposition effect by investigating international differences in the degree of investors' disposition effect. We utilize brokerage data of 387,993 traders from 83 countries and find…
Selection shapes all kinds of behaviors, including how we make decisions under uncertainty. The risk attitude reflected from it should be simple, flexible, yet consistent. In this paper we engaged evolutionary dynamics to find the decision…
When an algorithm provides risk assessments, we typically think of them as helpful inputs to human decisions, such as when risk scores are presented to judges or doctors. However, a decision-maker may react not only to the information…
Altruistic punishment, where individuals incur personal costs to punish others who have harmed third parties, presents an evolutionary conundrum as it undermines individual fitness. Resolving this puzzle is crucial for understanding the…
We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete…
We model the behavioral biases of human decision-making in securing interdependent systems and show that such behavioral decision-making leads to a suboptimal pattern of resource allocation compared to non-behavioral (rational)…