A cognitive modeling analysis of risk in sequential choice tasks

There are many ways to measure how people manage risk when they make decisions. A standard approach is to measure risk propensity using self-report questionnaires. An alternative approach is to use decision-making tasks that involve risk and uncertainty, and apply cognitive models of task behavior to infer parameters that measure people’s risk propensity. We report the results of a within-participants experiment that used three questionnaires and four decision-making tasks. The questionnaires are the Risk Propensity Scale, the Risk Taking Index, and the Domain Specific Risk Taking Scale. The decision-making tasks are the Balloon Analogue Risk Task, the preferential choice gambling task, the optimal stopping problem, and the bandit problem. We analyze the relationships between the risk measures and cognitive parameters using Bayesian inferences about the patterns of correlation, and using a novel cognitive latent variable modeling approach. The results show that people’s risk propensity is generally consistent within different conditions for each of the decision-making tasks. There is, however, little evidence that the way people manage risk generalizes across the tasks, or that it corresponds to the questionnaire measures.