This article studies decisions made under conditions of fear, when a catastrophic outcome is introduced in a lottery. It reports on experimental results and seeks to compare the predictions of the expected utility (EU) framework with those of a new axiomatic treatment of choice under uncertainty that takes explicit account of emotions such as fear (Chichilnisky 1996, 2000, 2002, 2009). Results provide evidence that fear influences the cognitive process of decision-making by leading some subjects to focus excessively on catastrophic events. Such heterogeneity in subjects’ behavior, while not consistent with EU-based functions, is fully consistent with the new type of utility function implied by the new axioms.
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This research is part of the Program on Information and Resources (PIR) of Columbia University, New York 10025, and of Columbia’s Consortium for Risk Management (CCRM). We thank Dominique Ami, Philippe Bertrand, Robert Kast, Alan Kirman, Marjorie Sweetko, Jean-Christophe Vergnaud, Jun Zheng, an anonymous referee and the Editorial Board of the Journal for helpful comments and suggestions. Financial support of the US Air Force Research Office (Research Grant -5-22272), the French Research Ministry (ATC Inserm 04-5666) and IDEP are gratefully acknowledged. Laurence Bouvard and Carole Paris provided meticulous technical support.
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Chanel, O., Chichilnisky, G. The influence of fear in decisions: Experimental evidence. J Risk Uncertain 39, 271 (2009). https://doi.org/10.1007/s11166-009-9079-8
- Decision under risk
- Catastrophic event
- Probability weighting function