scholarly journals The Realization Effect: Risk-Taking After Realized Versus Paper Losses

2016 ◽  
Vol 106 (8) ◽  
pp. 2086-2109 ◽  
Author(s):  
Alex Imas
Keyword(s):  
Significant Influence ◽  
Risk Taking ◽  
Risk Attitudes ◽  
Choice Under Uncertainty ◽  
Existing Data

Understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty. A large literature documents the significant influence of prior losses on risk attitudes. The findings appear contradictory: some studies find greater risk-taking after a loss, whereas others show the opposite—that people take on less risk. I reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses. Using new and existing data, I replicate prior findings and demonstrate that following a realized loss, individuals avoid risk; if the same loss is not realized, a paper loss, individuals take on greater risk. (JEL D11, D14, D81, G11)

scholarly journals Chimpanzees (Pan troglodytes) Are More Averse to Social Than Nonsocial Risk

2018 ◽  
Vol 30 (1) ◽  
pp. 105-115 ◽  
Author(s):  
Sarah E. Calcutt ◽  
Darby Proctor ◽  
Sarah M. Berman ◽  
Frans B. M. de Waal
Keyword(s):  
Decision Making ◽  
Pan Troglodytes ◽  
Risk Taking ◽  
Trust Game ◽  
Risk Attitudes ◽  
Social Risk ◽  
Risky Decision ◽  
Emotional Factors ◽  
Economic Decision Making ◽  
Tit For Tat

Social risk is a domain of risk in which the costs, benefits, and uncertainty of an action depend on the behavior of another individual. Humans overvalue the costs of a socially risky decision when compared with that of purely economic risk. Here, we played a trust game with 8 female captive chimpanzees ( Pan troglodytes) to determine whether this bias exists in one of our closest living relatives. A correlation between an individual’s social- and nonsocial-risk attitudes indicated stable individual variation, yet the chimpanzees were more averse to social than nonsocial risk. This indicates differences between social and economic decision making and emotional factors in social risk taking. In another experiment using the same paradigm, subjects played with several partners with whom they had varying relationships. Preexisting relationships did not impact the subjects’ choices. Instead, the apes used a tit-for-tat strategy and were influenced by the outcome of early interactions with a partner.

Status Concerns and Occupational Choice Under Uncertainty

2006 ◽  
Vol 6 (1) ◽  
Author(s):  
Christiane Clemens
Keyword(s):  
Risk Taking ◽  
Occupational Choice ◽  
Economic Indicator ◽  
Class Membership ◽  
Choice Under Uncertainty ◽  
First Case ◽  
The Status ◽  
The Mean ◽  
Carry Over ◽  
Effective Degree

This paper examines the consequences of status preferences on entrepreneurial risk-taking in a general equilibrium model of occupational choice. We distinguish between two frames of reference. In the first, status is derived from class-membership, the economic indicator of which is the expected relative income of the person's occupation. In the second, status is tied to individual income relative to the mean. We find that the effect of status needs depends on whether or not the status variable itself is subject to risk. While social status increases entrepreneurial risk-taking in the first case, the effect is ambiguous in the second and crucially depends on how status preferences alter the effective degree of risk aversion. The results carry over to the distributional consequences, where status preferences have an equalizing effect only if certain conditions are met.

scholarly journals Impact of positive illusions and experience on decision to invest in own new venture

2021 ◽  
Vol 65 (3) ◽  
pp. 269-285
Author(s):  
Andrea Zelienková ◽  
Keyword(s):  
Risk Taking ◽  
Investment Decision ◽  
Illusion Of Control ◽  
Risk Attitudes ◽  
Positive Illusions ◽  
Unrealistic Optimism ◽  
Positive Events ◽  
Opportunity Evaluation ◽  
The Relationship ◽  
Process Macro

Objectives. The objective of this study is threefold: 1) to examine the effect of positive illusions on risk taking manifested in opportunity evaluation and investment decision; 2) to examine the mediating role of risk attitudes on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision; 3) to examine the moderating effect of experience on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Sample and setting. Research sample comprised 132 entrepreneurs aged between 19 and 63 (M = 40.6; SD = 10.8) owning small, medium, and large-sized businesses. Hypotheses. 1) Individuals exhibiting higher positive illusions (overconfidence, unrealistic optimism, illusion of control) would take higher risk manifested in opportunity evaluation and investment decision. 2) Risk attitudes will mediate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. 3) Experience will moderate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Statistical analysis and results. 1) Using simple linear regression it was found that only unrealistic optimism for rare positive events and illusion of control predicted risk taking manifested in investment decision. None of positive illusions explained opportunity evaluation. 2) Using PROCESS macro for mediation analysis it was found that domain-specific risk perception, rather than general risk tolerance, is statistically significant mediator of the relationship between unrealistic optimism for rare positive events and investment decision. 3) Moderation analysis via PROCESS macro showed that only entrepreneurial experience moderates the relationship between unrealistic optimism for rare positive events and investment decision using own savings. The limitations concerning gender and domain specificity of methods are discussed in the study.

Integrated Accident Model for Marine Convoy Traffic in Ice-Covered Waters

2020 ◽  
Vol 162 (A2) ◽  
Author(s):  
B Khan ◽  
F Khan ◽  
B Veitch
Keyword(s):  
Risk Factors ◽  
Decision Making ◽  
Sensitivity Analysis ◽  
Factor Analysis ◽  
Significant Influence ◽  
Risk Taking ◽  
Human Factor ◽  
Additional Risk ◽  
Safe Navigation ◽  
Accident Probabilities

Independent safe navigation in ice-covered water is difficult. Icebreaker assistance is required for sailing through ice- covered waters. This poses an additional risk of collision. The study proposes a modified Human Factor Analysis and Classification (HFACS) framework to identify and classify contributing risk factors during a convoy. HFACS integration with Nagel-Schrekenberg (NaSch) model considers an operator’s behaviour and links it with the occurrence of various risk factors. The study finds significant influence in risk from small changes in two new factors, viz., crew reduction and crew overload. For example, based on the sensitivity analysis, it is determined that about a 17% contribution of crew reduction and about a 24% of contribution of crew overload increase the contribution of risk taking by an amount of approximately 93% in the overall risk of accidents. The accident probabilities obtained here will be helpful in decision making concerning safe operations during a convoy.

INTEGRATED ACCIDENT MODEL FOR MARINE CONVOY TRAFFIC IN ICE- COVERED WATERS

2021 ◽  
Vol 162 (A2) ◽  
Author(s):  
B Khan ◽  
F Khan ◽  
B Veitch
Keyword(s):  
Risk Factors ◽  
Decision Making ◽  
Sensitivity Analysis ◽  
Factor Analysis ◽  
Significant Influence ◽  
Risk Taking ◽  
Human Factor ◽  
Additional Risk ◽  
Safe Navigation ◽  
Accident Probabilities

Independent safe navigation in ice-covered water is difficult. Icebreaker assistance is required for sailing through ice- covered waters. This poses an additional risk of collision. The study proposes a modified Human Factor Analysis and Classification (HFACS) framework to identify and classify contributing risk factors during a convoy. HFACS integration with Nagel-Schrekenberg (NaSch) model considers an operator’s behaviour and links it with the occurrence of various risk factors. The study finds significant influence in risk from small changes in two new factors, viz., crew reduction and crew overload. For example, based on the sensitivity analysis, it is determined that about a 17% contribution of crew reduction and about a 24% of contribution of crew overload increase the contribution of risk taking by an amount of approximately 93% in the overall risk of accidents. The accident probabilities obtained here will be helpful in decision making concerning safe operations during a convoy.

scholarly journals Orientación emprendedora en la innovación de las pequeñas y medianas empresas en México/ Entrepreneurial orientation in the innovation of small and medium-sized companies in Mexico

2020 ◽  
pp. 97-114
Keyword(s):  
Significant Influence ◽  
Risk Taking ◽  
Entrepreneurial Orientation ◽  
Structural Equations ◽  
Managerial Decision ◽  
Market Risks ◽  
Emerging Country ◽  
Toma De Decisiones ◽  
Innovation Capacity ◽  
Orientación Emprendedora

Resumen En la actualidad, los mercados se han visto cada vez más competidos, en donde las pequeñas y medianas empresas se han encontrado con nuevos desafíos para el correcto desempeño ante estos retos, uno de ellos es el de incrementar su innovación, para lo cual la búsqueda de capacidades que les lleven a lograrlo se vuelve de vital importancia en la toma de decisiones gerenciales. Es por ello, que el objetivo del estudio fue analizar la orientación emprendedora en la innovación de pequeñas y medianas empresas en México. Se determina la influencia de las dimensiones de proactividad, capacidad de innovación y toma de riesgos en la orientación emprendedora en la innovación de 400 pequeñas y medianas empresas de un país emergente como México. La investigación fue de carácter cuantitativo, transversal, para lo cual se aplicó un cuestionario a la alta gerencia, analizando los datos a través del modelaje de ecuaciones estructurales. Los resultados indican que las dimensiones de toma de riesgos y proactividad influyen positiva y significativamente, en cambio, la de capacidad de innovación tiene influencia positiva más no significativa, concluyendo que implica comportamientos organizacionales con propensión hacia mayor aceptación a riesgos de mercado y mejor reacción a tendencias y cambios. Abstract At present, markets have been increasingly competitive, where small and medium-sized companies have encountered new challenges for the correct performance before these challenges, one of them is to increase their innovation, for which the search skills that lead them to achieve it becomes of vital importance in managerial decision making. That is why the objective of the study was to analyze the entrepreneurial orientation in the innovation of small and medium-sized companies in Mexico. The influence of the dimensions of proactivity, innovation capacity and risk taking in the entrepreneurial orientation in the innovation of 400 small and medium-sized companies in an emerging country like Mexico is determined. The research was quantitative, transversal, for which a questionnaire was applied to senior management, analyzing the data through the modeling of structural equations. The results indicate that the dimensions of risk taking and proactivity have a positive and significant influence, whereas the innovation capacity has a positive but not significant influence, concluding that it implies organizational behaviors with a propensity towards greater acceptance of market risks and a better reaction to trends and changes

scholarly journals Taking unknown risks based on positive and negative information

2021 ◽  
Author(s):  
Amirhossein Tehranisafa ◽  
Atiye Sarabi-Jamab ◽  
Armin Maddah ◽  
AbdolHossein Vahabie ◽  
Babak N. Araabi ◽  
...  
Keyword(s):  
Risk Taking ◽  
Ambiguity Aversion ◽  
Risk Attitudes ◽  
Ambiguity Tolerance ◽  
Positive Evidence ◽  
Small Risk ◽  
Impact Risk ◽  
Partially Observable ◽  
Available Information ◽  
Full Probability

Many decisions have to be made under partial ambiguity where information is notavailable about the full probability distribution of risks. To decide in a principled way,one would have to make some assumption(s) about hidden risks. We examined howpeople may balance between the valence of the available information and the potentialinformation concealed by the ambiguity. Under partial ambiguity, people showedflexible skepticism towards the valence of the partially observable probabilisticinformation. When ambiguity size was small, risk taking was sensitive to valence: if theinformation was promising, ambiguity aversion increased, skeptically balancing thepromising prospects of available positive evidence against the hazards of what mightbe hidden from the view. Conversely, when the available information wasdisappointing, ambiguity tolerance increased, cautiously anticipating more than whatthe available information promised. This flexible skepticism was not a trivially reflexiveresponse to valence: when ambiguity was large (i.e., available information wasunreliable), the valence of available information did not impact risk attitudes.

scholarly journals Thirty Years of Prospect Theory in Economics: A Review and Assessment

2013 ◽  
Vol 27 (1) ◽  
pp. 173-196 ◽  
Author(s):  
Nicholas C Barberis
Keyword(s):  
Prospect Theory ◽  
Risk Taking ◽  
Empirical Work ◽  
Theoretical Work ◽  
Economic Behavior ◽  
Risk Attitudes ◽  
Mainstream Economic ◽  
Decision Under Risk ◽  
The Past ◽  
Excellent Description

In 1979, Daniel Kahneman and Amos Tversky, published a paper in Econometrica titled “Prospect Theory: An Analysis of Decision under Risk.” The paper presented a new model of risk attitudes called “prospect theory,” which elegantly captured the experimental evidence on risk taking, including the documented violations of expected utility. More than 30 years later, prospect theory is still widely viewed as the best available description of how people evaluate risk in experimental settings. However, there are still relatively few well-known and broadly accepted applications of prospect theory in economics. One might be tempted to conclude that, even if prospect theory is an excellent description of behavior in experimental settings, it is less relevant outside the laboratory. In my view, this lesson would be incorrect. Over the past decade, researchers in the field of behavioral economics have put a lot of thought into how prospect theory should be applied in economic settings. This effort is bearing fruit. A significant body of theoretical work now incorporates the ideas in prospect theory into more traditional models of economic behavior, and a growing body of empirical work tests the predictions of these new theories. I am optimistic that some insights of prospect theory will eventually find a permanent and significant place in mainstream economic analysis.

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