Errors in decision-making lead to overvaluing risky lotteries, study finds.
A new theory suggests that people make mistakes when calculating the value of risky choices. These errors tend to make us overestimate lotteries with outcomes close to the worst result, and underestimate those close to the best. This theory can explain why people show different attitudes towards risks and make certain mistakes in decision-making. The theory has been tested in various experiments and fits the data as well as other well-known theories.