The Psychology of Tail Events: Progress and Challenges
12 Pages Posted: 12 Mar 2013
Date Written: March 11, 2013
Over the past decade, there has been a surge of interest in “tail events” – rare, high-impact events. In this article, I start by summarizing some recent progress in our understanding of the psychology of tail events. I suggest that much of this progress has centered on the concept of “probability weighting” and, in particular, on applications of this concept in various fields of economics. I then describe some major open questions in this area.
Keywords: tail event, probability weighting, prospect theory
JEL Classification: D1, D8, G1
Suggested Citation: Suggested Citation