Many subjects in lab experiments show considerable risk aversion in small-stakes gambles. This is counter to the predictions of expected utility theory for any reasonable degree of risk aversion (Rabin 2000) but is consistent with loss aversion in prospect theory. Benjamin, Brown, and Shapiro (forthcoming) show that math skills reduce small-stakes risk aversion, consistent with broader evidence...

We focus on automatic strategies to optimize life cycle savings and investment. Classical optimal savings theory establishes that, given the level of risk aversion, a saver would keep the same relative amount invested in risky assets at any given time. We show that, when optimizing lifecycle investment, performance and risk assessment have to take into account the investor's risk aversion and t...

T paper finds preference reversals in measurements of ambiguity aversion, even if psychological and informational circumstances are kept constant. The reversals are of a fundamentally different nature than the reversals found before because they cannot be explained by context-dependent weightings of attributes. We offer an explanation based on Sugden’s random-reference theory, with different el...

Cost-sensitive multiclass classification has recently acquired significance in several applications, through the introduction of multiclass datasets with well-defined misclassification costs. The design of classification algorithms for this setting is considered. It is argued that the unreliable performance of current algorithms is due to the inability of the underlying loss functions to enforc...

This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Kőszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strateg...