Show Summary Details

p. 495. Risky choiceslocked

  • Michelle Baddeley


When we decide to cross the road, buy a lottery ticket, or invest our money, the decision involves risk and uncertainty. ‘Risky choices’ looks at how economists usually think of risk as quantifiable—in the form of expected utility theory—but behavioural economists challenge this understanding of risk. Daniel Kahneman and Amos Tversky developed prospect theory, which could incorporate the anomalous behaviour identified by the Allais and Ellsberg Paradoxes. They argued that any decision-making theory should be able to explain the certainty, reflection, and isolation effects. Alternatives to prospect theory include Richard Thaler’s mental accounting model and the regret theory of Graham Loomes and Robert Sugden.

Access to the complete content on Very Short Introductions online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can't find the answer there, please contact us.