Individual Preference for Longshots

2019 ◽  
Vol 18 (2) ◽  
pp. 1009-1039 ◽  
Author(s):  
Robin Chark ◽  
Soo Hong Chew ◽  
Songfa Zhong
Keyword(s):  
Risk Taking ◽  
Individual Preference ◽  
Decision Making Under Risk ◽  
Heterogeneous Preferences ◽  
Expected Payoff ◽  
Winning Probability ◽  
State Lotteries ◽  
Making Choices ◽  
Utility Models ◽  
Expected Payoffs

Abstract Results from studies on risk taking behavior suggest that people tend to be risk seeking when making choices over lotteries that involve longshots: small probabilities of winning sizable payoffs. To investigate preferences over longshots systematically, we conduct an incentivized experiment using state lotteries in China, each involving a single prize and fixed winning odds. This enables our construction of single-prize lotteries involving winning odds between 10-5 and 10-1 and winning prizes ranging from RMB10 (about USD1.60) to RMB10,000,000 (about USD1.60 million) across different expected payoffs. For lotteries with expected payoffs of 1 and 10, subjects exhibit heterogeneous preferences for longshots: some prefer the smallest winning probability whereas others favor intermediate winning probabilities. As the expected payoff increases to 100, subjects become predominantly risk averse, even for the lowest winning probability of 10-5. Our findings pose challenges for utility models of decision making under risk.

scholarly journals Comparing Different Information Levels

2017 ◽  
Vol 8 (1) ◽  
pp. 7-18
Author(s):  
Uwe Saint-Mont
Keyword(s):  
Random Variables ◽  
Stochastic Environment ◽  
Expected Payoff ◽  
Its Analysis ◽  
Information Sets ◽  
Expected Values ◽  
Expected Payoffs

Objective: Given a sequence of random variables X = X1, X2, . . .suppose the aim is to maximize one’s return by picking a ‘favorable’ Xi. Obviously, the expected payoff crucially depends on the information at hand. An optimally informed person knows all the values Xi = xi and thus receives E(sup Xi). Method: We will compare this return to the expected payoffs of a number of gamblers having less information, in particular supi(EXi), the value of the sequence to a person who only knows the random variables’ expected values. In general, there is a stochastic environment, (F.E. a class of random variables C), and several levels of information. Given some XϵC, an observer possessing information j obtains rj(X). We are going to study ‘information sets’ of the form. characterizing the advantage of k relative to j. Since such a set measures the additional payoff by virtue of increased information, its analysis yields a number of interesting results, in particular ‘prophet-type’ inequalities.

Assessing a Perceptual Model of Risky Real-Time Decision Making

1996 ◽  
Vol 40 (4) ◽  
pp. 223-227 ◽  
Author(s):  
Joshua B. Hurwitz
Keyword(s):  
Decision Making ◽  
Real Time ◽  
Risk Taking ◽  
Real Life ◽  
Decision Making Under Risk ◽  
Risky Decision ◽  
Automobile Accidents ◽  
Perceptual Model ◽  
Objective Risk ◽  
Risk Acceptance

A new model of real-time risky decision making is introduced that predicts tradeoffs between processing and risk taking during driving. This model, called Decision-Making under Risk in a Vehicle, or DRIVE, was fitted to data from a task in which subjects decided when to cross an intersection as a car approached from the cross street. Results showed that subjects attempted to cross less often before the oncoming car when it started closer to the intersection, even though objective risk was the same regardless of starting distance. Also, when the car started closer, subjects who reported having more real-life automobile accidents were less likely to take advantage of a longer opportunity to cross first. These results, along with results from fitting DRIVE to the data, suggest that risk-taking effects can be accounted for by a model of risk perception, and not by a model of risk acceptance.

The Relative State Model: Integrating Need-Based and Ability-Based Pathways to Risk-Taking

2016 ◽  
Vol 21 (2) ◽  
pp. 176-198 ◽  
Author(s):  
Sandeep Mishra ◽  
Pat Barclay ◽  
Adam Sparks
Keyword(s):  
Risk Taking ◽  
State Model ◽  
Risk Sensitivity ◽  
Costs And Benefits ◽  
Decision Making Under Risk ◽  
Relative State ◽  
Sensitivity Theory ◽  
Domain Generality ◽  
Competitive Disadvantage ◽  
Versus Domain

Who takes risks, and why? Does risk-taking in one context predict risk-taking in other contexts? We seek to address these questions by considering two non-independent pathways to risk: need-based and ability-based. The need-based pathway suggests that risk-taking is a product of competitive disadvantage consistent with risk-sensitivity theory. The ability-based pathway suggests that people engage in risk-taking when they possess abilities or traits that increase the probability of successful risk-taking, the expected value of the risky behavior itself, and/or have signaling value. We provide a conceptual model of decision-making under risk—the relative state model—that integrates both pathways and explicates how situational and embodied factors influence the estimated costs and benefits of risk-taking in different contexts. This model may help to reconcile long-standing disagreements and issues regarding the etiology of risk-taking, such as the domain-generality versus domain-specificity of risk or differential engagement in antisocial and non-antisocial risk-taking.

RISKY CHOICES IN A RISK-TAKING EXPERIMENT: ARE SINGAPOREANS DIFFERENT FROM THE REST OF THE WORLD?

2013 ◽  
Vol 58 (03) ◽  
pp. 1350015
Author(s):  
ROLAND CHEO
Keyword(s):  
Risk Taking ◽  
Reference Group ◽  
Status Quo ◽  
Exchange Students ◽  
Risk Seeking ◽  
Risk Neutral ◽  
Seeking Behavior ◽  
Expected Payoffs ◽  
Gains And Losses ◽  
Chinese Undergraduates

This paper introduces a rich experimental environment which allows one to control for possible status quo effects as well as the "anticipatory fear of loss" inherent in gambles by framing scenarios in terms of gains and losses. A total of 162 undergraduates — Africans, Caucasians, Singaporeans and Chinese — are recruited for this study. From the risk choices that students take, we can see how Singaporeans differ from their counterparts elsewhere. The results show that Singaporeans are less risk averse than African or Caucasian exchange students. In terms of risk seeking behavior, when using Caucasians as a reference group, Singaporeans and Chinese undergraduates are also relatively more risk seeking as well. The majority of the players are risk neutral in this experiment. Singaporeans, like the Caucasians and Chinese in the sample, are all more likely to favor risk neutral strategies if their default gamble is one with higher expected payoffs.

Disgust as a mechanism for decision making under risk: Illuminating sex differences and individual risk-taking correlates of disgust propensity.

Emotion ◽  
2018 ◽  
Vol 18 (7) ◽  
pp. 942-958 ◽  
Author(s):  
Adam Maxwell Sparks ◽  
Daniel M. T. Fessler ◽  
Kai Qin Chan ◽  
Ashwini Ashokkumar ◽  
Colin Holbrook
Keyword(s):  
Decision Making ◽  
Sex Differences ◽  
Risk Taking ◽  
Individual Risk ◽  
Decision Making Under Risk ◽  
Disgust Propensity

Gorman Heterogeneous Households

2013 ◽  
Author(s):  
Lars Peter Hansen ◽  
Thomas J. Sargent
Keyword(s):  
Competitive Equilibrium ◽  
Individual Preference ◽  
State Variables ◽  
Heterogeneous Preferences ◽  
Demand Functions ◽  
Common Information ◽  
Representative Consumer ◽  
Information Set ◽  
The Common ◽  
The Individual

This chapter describes methods for computing equilibria of economies with consumers who have heterogeneous preferences and endowments. It adopts simplifications that facilitate coping with heterogeneity. In the present chapter, consumers differ only with respect to their endowments and the processes {bt} that disturb their preferences. It assumes that consumers have a common information set that includes observations on past values of the economy-wide capital stocks and the common exogenous state variables that drive each of the individual preference shock processes and the technology shock process {dt}. Preferences of individual consumers can be aggregated by summing both preference shocks and initial endowments across consumers, thereby forming a representative consumer. All aggregate aspects of a competitive equilibrium can be computed by forming the representative consumer and proceeding as in Chapter 7. The chapter shows how to calculate individual allocations by using the demand functions described in Chapter 9.3.

scholarly journals On the Relationship between Cognitive Ability and Risk Preference

2018 ◽  
Vol 32 (2) ◽  
pp. 115-134 ◽  
Author(s):  
Thomas Dohmen ◽  
Armin Falk ◽  
David Huffman ◽  
Uwe Sunde
Keyword(s):  
Decision Making ◽  
Cognitive Ability ◽  
Risk Taking ◽  
Risk Preference ◽  
Future Research ◽  
Life Domains ◽  
Risk And Uncertainty ◽  
Decision Making Under Risk ◽  
Controlled Environments ◽  
The Relationship

This paper will focus on the relationship between cognitive ability and decision-making under risk and uncertainty. Taken as a whole, this research indicates that cognitive ability is associated with risk-taking behavior in various contexts and life domains, including incentivized choices between lotteries in controlled environments, behavior in nonexperimental settings, and self-reported tendency to take risks. One pattern that emerges frequently in these studies is that cognitive ability tends to be positively correlated with avoidance of harmful risky situations, but it tends to be negatively correlated with risk aversion in advantageous situations. We conclude by discussing perspectives for future research, in particular the scope for the development of richer sets of elicitation instruments and measurement across a wider range of concepts.

scholarly journals Diurnal Cortisol and Decision Making Under Risk in Problem Gambling

2019 ◽  
Author(s):  
Tony W Buchanan
Keyword(s):  
Decision Making ◽  
Problem Gambling ◽  
Risk Taking ◽  
Healthy Control Group ◽  
Control Group ◽  
Decision Making Under Risk ◽  
Risky Decision ◽  
Diurnal Cortisol ◽  
Healthy Control ◽  
The Relationship

The aim of this study was to assess the influence of diurnal cortisol profile on decision making under risk in individuals with gambling disorder and a healthy control group. We examined the relationship between diurnal cortisol, assessed over the course of two days, and a battery of tasks that assessed decision making under risk, including the Columbia Card Task and the Cups Task. Thirty individuals with problem gambling and 29 healthy individuals took part in the study. Those with problem gambling showed blunted diurnal cortisol and more risk taking behavior compared to those in the healthy control group. Blunted cortisol profile was associated with more risky behavior and less sensitivity to losing money in problem gambling. These findings suggest that blunted stress physiology plays a role in specific parameters of risky decision making in problem gambling.

Boys With Epilepsy Are More Susceptible to Risk Taking

2010 ◽  
Vol 44 (10) ◽  
pp. 32
Author(s):  
PATRICE WENDLING
Keyword(s):  
Risk Taking
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