Article ID: | iaor1998697 |
Country: | United States |
Volume: | 43 |
Issue: | 2 |
Start Page Number: | 123 |
End Page Number: | 144 |
Publication Date: | Feb 1997 |
Journal: | Management Science |
Authors: | Weber Elke U., Milliman Richard A. |
Keywords: | decision: studies, decision theory |
This paper provides empirical evidence that distinguishes between alternative conceptualizations of the risky decision making process. Two studies investigate whether cross-situational differences in choice behavior should be interpreted in the expected utility framework as differences in risk attitude (as measured by risk-averse vs. risk-seeking utility functions) or as differences in the perception of the relative riskiness of choice alternatives as permitted by risk-return interpretations of utility functions, leaving open the possibility of stable cross-situational risk preference as the personality trait. To this end, we propose a way of assessing a person's inherent risk preference that factors out individual and situational differences in risk perception. We document that a definition of risk aversion and risk seeking as the preference for options