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On The Correlated Impact Of The Factors Of Risk Aversion On Decision-Making

Author

Listed:
  • Catalina POPESCU

    (Academy of Economic Studies, Bucharest, Romania)

  • Ion DOBRE

    (Academy of Economic Studies, Bucharest, Romania)

Abstract

Risk aversion is among the most advertised and complex factors influencing a decision, but it is itself subject to an intricate complex of both objective and subjective factors. The present paper set out to investigate some of the factors that would have appeared obvious in influencing attitudes towards risk, such as value of options, probability of options, level of information (specifically on probability) and position of the respondent relative to the outcome of the risk (loss or gain). For this purpose we devised a survey testing each of these elements and allowing for interpretation of their interdependence. After analyzing hypothetical situations, we also investigated how these were reflected in self-assessment and real-life behavior. What we found is that, although these factors do play their intuitive role in fundamenting decisions in contexts of risk, they are ill correlated to one another and may themselves not be coherent across different contexts.

Suggested Citation

  • Catalina POPESCU & Ion DOBRE, 2011. "On The Correlated Impact Of The Factors Of Risk Aversion On Decision-Making," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(4), pages 1-4, June.
    • Handle: RePEc:spp:jkmeit:1156
    as

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    References listed on IDEAS

    as
    1. Kenneth R. MacCrimmon & Donald A. Wehrung, 1990. "Characteristics of Risk Taking Executives," Management Science, INFORMS, vol. 36(4), pages 422-435, April.
    2. Kenneth J. Arrow, 1974. "The Use of Unbounded Utility Functions in Expected-Utility Maximization: Response," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 136-138.
    3. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    4. Elke U. Weber & Christopher Hsee, 1998. "Cross-Cultural Differences in Risk Perception, but Cross-Cultural Similarities in Attitudes Towards Perceived Risk," Management Science, INFORMS, vol. 44(9), pages 1205-1217, September.
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    More about this item

    Keywords

    risk aversion; decision-making; factor correlation;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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