Half-full or half-empty? A model of decision making under risk

• A new descriptive model of decision-making under risk.
• Retains much of the intuitive appeal of the expected value model.
• Explains various paradoxes in decision-making under risk.
• Relies on only two parameters that have clear behavioral interpretations.

We propose a descriptive model of decision making under risk, inspired by the “half-full, half-empty” glass metaphor, that explains well-known paradoxes identified by Allais (1953), Kahneman and Tversky (1979), and Birnbaum (2008). The model is intuitive in that it is closely related to the expected value criterion and its parameters have a clear behavioral interpretation, and parsimonious in that it provides an approach to modeling behavior based on only two parameters.