In 1956 the US psychologist Leon Festinger introduced a new concept in
social psychology: the theory of cognitive dissonance (Festinger, Riecken and
Schachter 1956). When two simultaneously held cognitions are inconsistent,
this will produce a state of cognitive dissonance. Because the experience of
dissonance is unpleasant, the person will strive to reduce it by changing their
beliefs.
Pratt (1964) considers utility functions, risk aversion and also risks considered
as a proportion of total assets.
Tversky and Kahneman (1973) introduced the availability heuristic: `a judgmental
heuristic in which a person evaluates the frequency of classes or the probability
of events by availability, i.e. by the ease with which relevant instances
come to mind.' The reliance on the availability heuristic leads to systematic
biases.