Consistent constructs in individuals' risk taking in decisions from experience

Abstract

The current research evaluates the consistency of different constructs affecting risk taking in individuals' experiential decisions across different levels of risk. Specifically, we contrast three major views concerning the psychological constructs that underlie risk taking behavior. The first is the classical economic approach which views risk as the sensitivity to differences in variance. The second is the latent-components approach suggesting the importance of sensitivity to losses and diminishing sensitivity to marginal increases in payoffs. The third approach, risk acceptance, relates to the willingness to accept probable outcomes over certainty. The results of three studies indicate that (1) Individuals do not exhibit consistency in their sensitivity to variance. (2) Consistent diminishing sensitivity is found within the gain and loss domains, but across these domains individuals seem to be consistent only when deciding between constant versus probable outcomes, suggesting that they reliably differ in their risk acceptance. (3) Risk acceptance appears to entail different psychological constructs when the decision problem involves co-occurring gains and losses.