IDEAS home Printed from https://ideas.repec.org/a/kap/jrisku/v30y2005i2p133-156.html
   My bibliography  Save this article

An Empirical Investigation of the Assumptions of Risk-Value Models

Author

Listed:
  • John Butler
  • James Dyer
  • Jiammin Jia

Abstract

Do participants make decisions consistent with risk-value tradeoffs? One hundred and five undergraduate business students made risk and preference judgments about lottery pairs in a series of paper surveys. The data indicate that the participants’ responses were generally consistent with the key assumptions of risk-value models, but that some extensions of the theory would improve this consistency. In particular, we find that modifying the risk assumptions of the risk-value theory so they are consistent the concept of the reflection of the risk attitude in the domains of gains and losses increases the agreement between the theory and the participants’ responses. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • John Butler & James Dyer & Jiammin Jia, 2005. "An Empirical Investigation of the Assumptions of Risk-Value Models," Journal of Risk and Uncertainty, Springer, vol. 30(2), pages 133-156, January.
    • Handle: RePEc:kap:jrisku:v:30:y:2005:i:2:p:133-156
    DOI: 10.1007/s11166-005-6562-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11166-005-6562-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11166-005-6562-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jia, Jianmin & Dyer, James S & Butler, John C, 2001. "Generalized Disappointment Models," Journal of Risk and Uncertainty, Springer, vol. 22(1), pages 59-78, January.
    2. Weber, Elke U. & Bottom, William P., 1990. "An empirical evaluation of the transitivity, monotonicity, accounting, and conjoint axioms for perceived risk," Organizational Behavior and Human Decision Processes, Elsevier, vol. 45(2), pages 253-275, April.
    3. Sarin, Rakesh K. & Weber, Martin, 1993. "Risk-value models," European Journal of Operational Research, Elsevier, vol. 70(2), pages 135-149, October.
    4. Peter C. Fishburn & Ralph L. Keeney, 1975. "Generalized Utility Independence and Some Implications," Operations Research, INFORMS, vol. 23(5), pages 928-940, October.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Keller, L. Robin & Sarin, Rakesh K. & Weber, Martin, 1986. "Empirical investigation of some properties of the perceived riskiness of gambles," Organizational Behavior and Human Decision Processes, Elsevier, vol. 38(1), pages 114-130, August.
    7. Moshe Levy & Haim Levy, 2013. "Prospect Theory: Much Ado About Nothing?," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 7, pages 129-144, World Scientific Publishing Co. Pte. Ltd..
    8. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    9. Jianmin Jia & James S. Dyer & John C. Butler, 1999. "Measures of Perceived Risk," Management Science, INFORMS, vol. 45(4), pages 519-532, April.
    10. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-1289, November.
    11. Elke U. Weber & Richard A. Milliman, 1997. "Perceived Risk Attitudes: Relating Risk Perception to Risky Choice," Management Science, INFORMS, vol. 43(2), pages 123-144, February.
    12. David E. Bell, 1985. "Disappointment in Decision Making Under Uncertainty," Operations Research, INFORMS, vol. 33(1), pages 1-27, February.
    13. David E. Bell, 1995. "Risk, Return, and Utility," Management Science, INFORMS, vol. 41(1), pages 23-30, January.
    14. John W. Payne & Dan J. Laughhunn & Roy Crum, 1980. "Translation of Gambles and Aspiration Level Effects in Risky Choice Behavior," Management Science, INFORMS, vol. 26(10), pages 1039-1060, October.
    15. Graham Loomes & Robert Sugden, 1986. "Disappointment and Dynamic Consistency in Choice under Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(2), pages 271-282.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kulkarni, Kedar, 2021. "Quantifying Vulnerability of Crop Yields in India to Weather Extremes," 2021 Annual Meeting, August 1-3, Austin, Texas 313879, Agricultural and Applied Economics Association.
    2. Andrea C. Hupman & Jay Simon, 2023. "The Legacy of Peter Fishburn: Foundational Work and Lasting Impact," Decision Analysis, INFORMS, vol. 20(1), pages 1-15, March.
    3. Dennis Vrecko & Alexander Klos & Thomas Langer, 2009. "Impact of Presentation Format and Self-Reported Risk Aversion on Revealed Skewness Preferences," Decision Analysis, INFORMS, vol. 6(2), pages 57-74, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jianmin Jia & James S. Dyer & John C. Butler, 1999. "Measures of Perceived Risk," Management Science, INFORMS, vol. 45(4), pages 519-532, April.
    2. Abdellaoui, Mohammed & Bleichrodt, Han, 2007. "Eliciting Gul's theory of disappointment aversion by the tradeoff method," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 631-645, December.
    3. Christine Kaufmann & Martin Weber & Emily Haisley, 2013. "The Role of Experience Sampling and Graphical Displays on One's Investment Risk Appetite," Management Science, INFORMS, vol. 59(2), pages 323-340, July.
    4. James Andreoni & Charles Sprenger, 2011. "Uncertainty Equivalents: Testing the Limits of the Independence Axiom," NBER Working Papers 17342, National Bureau of Economic Research, Inc.
    5. Brice Corgnet & Roberto Hernán González, 2023. "On The Appeal Of Complexity," Working Papers 2312, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Cillo, Alessandra & Delquié, Philippe, 2014. "Mean-risk analysis with enhanced behavioral content," European Journal of Operational Research, Elsevier, vol. 239(3), pages 764-775.
    7. Pavlo Blavatskyy, 2018. "A second-generation disappointment aversion theory of decision making under risk," Theory and Decision, Springer, vol. 84(1), pages 29-60, January.
    8. Franke, Günter & Weber, Martin, 2001. "Heterogeneity of Investors and Asset Pricing in a Risk-Value World," CoFE Discussion Papers 01/08, University of Konstanz, Center of Finance and Econometrics (CoFE).
    9. Christoffersen, Jeppe & Holzmeister, Felix & Plenborg, Thomas, 2023. "What is risk to managers?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).
    10. Yang, Jiping & Qiu, Wanhua, 2005. "A measure of risk and a decision-making model based on expected utility and entropy," European Journal of Operational Research, Elsevier, vol. 164(3), pages 792-799, August.
    11. Ronald Bosman & Frans Van Winden, 2010. "Global Risk, Investment and Emotions," Economica, London School of Economics and Political Science, vol. 77(307), pages 451-471, July.
    12. Ivan Barreda-Tarrazona & Ainhoa Jaramillo-Gutierrez & Daniel Navarro-Martinez & Gerardo Sabater-Grande, 2014. "The role of forgone opportunities in decision making under risk," Journal of Risk and Uncertainty, Springer, vol. 49(2), pages 167-188, October.
    13. repec:cup:judgdm:v:16:y:2021:i:6:p:1324-1369 is not listed on IDEAS
    14. Ann-Renée Blais & Elke U. Weber, 2006. "A Domain-Specific Risk-Taking (DOSPERT)Scale for Adult Populations," CIRANO Working Papers 2006s-24, CIRANO.
    15. Xiaoxiao Hu & Xiaofei Xie, 2012. "Validation of the Domain-Specific Risk-Taking Scale in Chinese college students," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(2), pages 181-188, March.
    16. Philippe Delquié & Alessandra Cillo, 2006. "Disappointment without prior expectation: a unifying perspective on decision under risk," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 197-215, December.
    17. González-Jiménez, Víctor, 2024. "Incentive design for reference-dependent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 493-518.
    18. Jonathan Chapman & Erik Snowberg & Stephanie Wang & Colin Camerer, 2022. "Looming Large or Seeming Small? Attitudes Towards Losses in a Representative Sample," CESifo Working Paper Series 9820, CESifo.
    19. Christian Knoller, 2016. "MULTIPLE REFERENCE POINTS AND THE DEMAND FOR PRINCIPAL-PROTECTED LIFE ANNUITIES: An EXPERIMENTAL ANALYSIS," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 163-179, January.
    20. Kavitha Ranganathan, 2018. "Does Global Shapes Of Utility Functions Matter For Investment Decisions?," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 341-361, October.
    21. Levon Barseghyan & Francesca Molinari & Ted O'Donoghue & Joshua C. Teitelbaum, 2013. "The Nature of Risk Preferences: Evidence from Insurance Choices," American Economic Review, American Economic Association, vol. 103(6), pages 2499-2529, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:30:y:2005:i:2:p:133-156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.