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Full-Text Articles in Behavioral Economics
The Nature Of Risk Preferences: Evidence From Insurance Choices, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum, Ted O'Donoghue
The Nature Of Risk Preferences: Evidence From Insurance Choices, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum, Ted O'Donoghue
Georgetown Law Faculty Publications and Other Works
The authors use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. They find that probability distortions--characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes--play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. They demonstrate that neither Kőszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting.
The Hidden Limits Of The Charitable Deduction: An Introduction To Hypersalience, Lilian V. Faulhaber
The Hidden Limits Of The Charitable Deduction: An Introduction To Hypersalience, Lilian V. Faulhaber
Georgetown Law Faculty Publications and Other Works
Behavioral economics introduced the concept of salience to law and economics. In the area of tax policy, salience refers to the prominence of taxes in the minds of taxpayers. This article complicates the literature on salience and taxation by introducing the concept of “hypersalience,” which is in many ways the mirror image of hidden taxation. While a revenue-raising tax provision must be hidden for taxpayers to underestimate their tax bill, a revenue-reducing tax provision – such as a deduction, exclusion, or credit – must be more than fully salient for taxpayers to underestimate their tax bill. In other words, the …
Behavioral Approaches To Corporate Law, Donald C. Langevoort
Behavioral Approaches To Corporate Law, Donald C. Langevoort
Georgetown Law Faculty Publications and Other Works
This chapter reviews the challenges associated with developing a plausible theory of why psychological "heuristics and biases" might persist in high-stakes business settings. Specific attention is given to issues of loyalty on corporate boards, behavioral finance, and corporate cultures.