THE PERCEIVED RISK-VALUE RELATION AND MODELS OF PREFERENCES

What is it about?

The most salient characteristic of a risky choice is an approach-avoidance conflict – a desire to maximize benefits and minimize risk. This conflict is directly addressed in Risk-Value (R-V) models. Our goal is to determine to what extend the positive correlation between risk and value assumed in these models actually holds, as it is a necessary condition for tradeoffs. If people do not perceive a R-V relation as positive, there is no conflict, and decisions may be made on the basis of either criterion according to a lexicographic strategy, whereby either the least risky or the most beneficial option is chosen. The dependence between perception of the R-V relation and decision strategies was tested in three studies performed with 411 university students. Experimental (Studies 1-3) and questionnaire (Studies 2-3) measurements were used. In experiments, participants rated riskiness of two-outcome lotteries and made choices between a lottery and a sure thing. The perceived R-V relation was also investigated by way of three scales in the DOSPERT questionnaire – willingness to take risk (RT), perceived risk (PR), and expected benefits (EB). Our findings support the hypothesis that perception of a positive R-V relation is necessary for tradeoffs - the PR and EB scores are positively correlated for those, who make tradeoffs. When the scores on the PR and EB scales are negatively correlated, preferences are described as a function of either perceived risk, or expected benefits only. Key words: perceived risk, R-V models, affect heuristic, lexicographic risk preferences

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