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The rich get richer and the poor get poorer: On risk aversion in behavioral decision-making

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  • Franken, Ingmar H. A.
  • Georgieva, Irina
  • Muris, Peter
  • Dijksterhuis, Ap

Abstract

Some studies have found that choices become more risk averse after gains and more risk seeking after losses, although other studies have found the opposite. The latter tend to use hypothetical cases that encourage deliberation. In the current study, we examined the effects of prior gains and losses on a task designed to encourage less reflective decision making, the Iowa Gambling Task (IGT). Fifty participants conducted a manipulated decision-making task in which one group gained money, whereas the other group lost money, followed by the IGT. Participants who experienced a prior monetary loss displayed more risky choice behavior on the IGT than subjects who experienced a prior gain. These effects were not mediated by a positive or negative affect, although the sample size may have been too small to detect a small effect.

Suggested Citation

  • Franken, Ingmar H. A. & Georgieva, Irina & Muris, Peter & Dijksterhuis, Ap, 2006. "The rich get richer and the poor get poorer: On risk aversion in behavioral decision-making," Judgment and Decision Making, Cambridge University Press, vol. 1(2), pages 153-158, November.
    • Handle: RePEc:cup:judgdm:v:1:y:2006:i:2:p:153-158_7
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