Risk Attitude in Decision Making: In Search of Trait-Like Constructs

Authors


should be sent to Eldad Yechiam, Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel. E-mail: yeldad@tx.technion.ac.il

Abstract

We evaluate the consistency of different constructs affecting risk attitude in individuals’ decisions across different levels of risk. Specifically, we contrast views suggesting that risk attitude is a single primitive construct with those suggesting it consists of multiple latent components. Additionally, we evaluate such constructs as sensitivity to losses, diminishing sensitivity to increases in payoff, sensitivity to variance, and risk acceptance (the willingness to accept probable outcomes over certainty). In search of trait-like constructs, the paper reviews experimental results focusing on the consistency of these constructs in different tasks as well as their temporal consistency. Overall, the findings show that the most consistent factor is risk acceptance, and they also demonstrate its potential boundaries. These results are modeled with a simple quantitative index of subjective risk. A survey of decisions under risk further reveals that participants exhibit almost no consistency across different tasks in this setting, highlighting the advantage of experiential tasks for studying individual differences.

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