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A Survey Study of Factors Influencing Risk-Taking Behavior in Real-World Decisions Under Uncertainty

IESE Business School, Avenida Pearson, 21, 08034 Barcelona, Spain
Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain
mbaucells{at}iese.edu
cristina.rata{at}upf.edu

With the goal of investigating decision making under uncertainty in real-world decisions, we conduct a survey requiring 261 subjects to describe a recent real-life decision and to answer questions about several dimensions of such decision, including reference-dependence, domain, the default alternative, and the type of consequences. We confirm a key prediction of prospect theory, namely, that perceiving the sure outcome as a loss increases risk-taking behavior. Such perception of losses also increases the attractiveness (perceived probabilities and estimated consequences) of the risky option. The results also confirm that the domain (professional versus private) of a decision is a factor influencing risk-taking behavior. Risk-taking behavior does not vary across the three groups considered (undergraduates, MBA students, and executives) and does not depend on the type of consequences (monetary or not). We confirm that reference-dependence, and not the default alternative, is the driver of risk-taking behavior.

Key Words: real-world decisions; risk-taking behavior; reference-dependence; domain; default alternative; type of consequence
History: Received on October 13, 2005. Accepted on August 5, 2006.

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