Half-Full or Half-Empty? A Simple Model of Decision Making Under Risk

We propose a simple model of decision making under risk inspired by the "half-full, half-empty" glass metaphor. 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. It explains well-known paradoxes identified by Allais (1953), Kahneman and Tversky (1979), and Birnbaum (2008).