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

Abstract 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.