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Willingness to Take Risk: The Role of Risk Conception and Optimism

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  • Thomas Dohmen
  • Simone Quercia
  • Jana Willrodt

Abstract

We show that the disposition to focus on favorable or unfavorable outcomes of risky situations affects willingness to take risk as measured by the general risk question. We demonstrate that this disposition, which we call risk conception, is strongly associated with optimism, a stable facet of personality, and that it predicts real-life risk taking. The general risk question captures this disposition alongside pure risk preference. This likely contributes to the predictive power of the general risk question across domains. Our results also rationalize why risk taking is related to optimism.

Suggested Citation

  • Thomas Dohmen & Simone Quercia & Jana Willrodt, 2019. "Willingness to Take Risk: The Role of Risk Conception and Optimism," SOEPpapers on Multidisciplinary Panel Data Research 1026, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp1026
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    Cited by:

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    2. Armando N. Meier, 2021. "Emotions and Risk Attitudes," SOEPpapers on Multidisciplinary Panel Data Research 1118, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Johannes Brumm & Michael Grill & Felix Kubler & Karl Schmedders, 2023. "Re-use of collateral: Leverage, volatility, and welfare," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 19-46, January.
    4. Armando N. Meier, 2019. "Emotions, Risk Attitudes, and Patience," SOEPpapers on Multidisciplinary Panel Data Research 1041, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Dietmar Fehr & Yannick Reichlin, 2021. "Status, Control Beliefs, and Risk-Taking," CESifo Working Paper Series 9253, CESifo.
    6. D’Exelle, Ben & Munro, Alistair & Verschoor, Arjan, 2024. "Agricultural investment behaviour and contingency: Experimental evidence from Uganda," World Development, Elsevier, vol. 173(C).

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    More about this item

    Keywords

    Risk taking behavior; optimism; preference measure; risk conception;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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