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Risk behavior in decision-making in a multi-person-setting

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  • Fenzl, Thomas
  • Brudermann, Thomas

Abstract

When people have to make a choice in an individual setting between a known-risk option and an untested situation of uncertainty, the majority prefers the known risk over the uncertainty of the alternative. The confrontation with an unfamiliar situation in an environment including other participants allows for new mechanisms in risk-perception and risk-evaluation. People tend to become other-directed and use the behavior and consequences of actions of other people in the environment to assess risk. Our investigations show that warning signals observable in the behavior of other participants in the setting reinforce people's preference for known risks over uncertainty.

Suggested Citation

  • Fenzl, Thomas & Brudermann, Thomas, 2009. "Risk behavior in decision-making in a multi-person-setting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 752-756, October.
  • Handle: RePEc:eee:soceco:v:38:y:2009:i:5:p:752-756
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    References listed on IDEAS

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    1. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    3. Faragó, Klára & Kiss, Orhidea & Boros, János, 2008. "Risk-taking in entrepreneurs, compared to criminals and students: The role of uncertainty and stakes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2231-2241, December.
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    Cited by:

    1. Kefan, Xie & Gang, Chen & Wu, Desheng Dash & Luo, Cuicui & Qian, Wu, 2011. "Entrepreneurial team's risk-based decision-making: A dynamic game analysis," International Journal of Production Economics, Elsevier, vol. 134(1), pages 78-86, November.
    2. Yao, Rui & Sharpe, Deanna L. & Wang, Feifei, 2011. "Decomposing the age effect on risk tolerance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 879-887.
    3. Brudermann, Thomas & Reinsberger, Kathrin & Orthofer, Anita & Kislinger, Martin & Posch, Alfred, 2013. "Photovoltaics in agriculture: A case study on decision making of farmers," Energy Policy, Elsevier, vol. 61(C), pages 96-103.

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