HIGHLIGHTS
SUMMARY
Classical studies of human decision making (Allais, 1953; Tversky and Kahneman, 1974; Kahneman and Tversky, 1979) use Savage`s Subjective Expected Utility (SEU) theory as a benchmark. Studies of judgment highlight robust overestimation of the probability of rare events (Phillips and Edwards, 1966; Erev et_al, 1994), and studies of decisions under risk document overweighting of low probability outcomes (Kahneman and Tversky, 1979), thus, it is natural to conclude that oversensitivity to rare events is a general tendency (Fox and Tversky, 1998). While this prediction seems reasonable under the assumption that people overestimate and overweight . . .
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