Preprintgold2020

Towards a typology of risk preference: Four risk profiles describe two thirds of individuals in a large sample of the U.S. population

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Decision-Making and Behavioral Economics Risk Perception and Management Experimental Behavioral Economics Studies

Abstract

It has been a longstanding goal of the behavioral sciences to measure and model people’s risk preferences. In this article we adopt a novel theoretical perspective of doing so and test to what extent specific types of individuals share similar risk profiles (i.e., configurations of multidimensional risk preferences). To this end we analyzed data of a U.S. sample (N = 3,123) in a comprehensive and rigorous way, resulting in a twofold contribution. First, based on data from the Domain-Specific Risk-Taking scale (DOSPERT) and using a cross-validation procedure, we established a multidimensional trait space including general and domain-specific dimensions of risk preference. Second, we employed model-based cluster analyses in this multidimensional trait space, finding that 66% of participants can be described well with four basic risk profiles. In sum, the typological perspective proposed in this article has important implications for current theories of risk preference and the measurement of individual differences therein.

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References

1979Prospect Theory: An Analysis of Decision under Risk 1990An alternative "description of personality": The Big-Five factor structure.2011INDIVIDUAL RISK ATTITUDES: MEASUREMENT, DETERMINANTS, AND BEHAVIORAL CONSEQUENCES 2002A domain‐specific risk‐attitude scale: measuring risk perceptions and risk behaviors 1954Exposition of a New Theory on the Measurement of Risk 19962. De Gustibus Non Est Disputandum 1997Perceived Risk Attitudes: Relating Risk Perception to Risky Choice 1937The Bi-Factor Method

Cited by

2022Beyond money: Risk preferences across both economic and non-economic contexts predict financial decisions 2021Adolescent risk-taking likelihood, risk perceptions, and benefit perceptions across domains 2023Exploring the Sources of Variance in Risky Decision Making with Large Language Models 2024More than Money Over Time: A Verbal Self-Report Scale for Measuring Intertemporal Preferences

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