IDEAS home Printed from
   My bibliography  Save this article

Perceived Risk Attitudes: Relating Risk Perception to Risky Choice


  • Elke U. Weber

    (Department of Psychology, Townshend Hall, The Ohio State University, Columbus, Ohio 43210)

  • Richard A. Milliman

    (McKinsey & Company, 133 Peachtree Street, N.E., Atlanta, Georgia 30303)


This paper provides empirical evidence that distinguishes between alternative conceptualizations of the risky decision making process. Two studies investigate whether cross-situational differences in choice behavior should be interpreted in the expected utility framework as differences in risk attitude (as measured by risk-averse vs. risk-seeking utility functions) or as differences in the perception of the relative riskiness of choice alternatives as permitted by risk-return interpretations of utility functions, leaving open the possibility of stable cross-situational risk preference as a personality trait. To this end, we propose a way of assessing a person's inherent risk preference that factors out individual and situational differences in risk perception. We document that a definition of risk aversion and risk seeking as the preference for options perceived to be more risky or less risky, respectively, provides the cross-situational stability to a person's risk preference that has eluded more traditional definitions. In Experiment 1, commuters changed their preferences for trains with risky arrival times when the alternatives involved gains in commuting time rather than losses. However, changes in preference coincided with changes in the perception of the riskiness of the choice alternatives, leaving the perceived risk attitudes of a majority of commuters unchanged. Experiment 2, a stockmarket investment task, investigated changes in risk perception, information acquisition, and stock selection as a function of outcome feedback. Investors' stock selections and their perception of the risk of the same stocks were different in a series of decisions in which they lost money than in a series in which they made money. As in Experiment 1, differences in choice and in risk perception were systematically related, such that the majority of investors had the same preference for perceived risk in both series of decisions. Our results provide empirical support for the usefulness of recent risk-return conceptualizations of risky choice (Bell [Bell, D. E. 1995. Risk, return, and utility. Management Sci. 41 23--30.], Jia and Dyer [Jia, J., J. S. Dyer. 1994. A standard measure of risk and risk-value models. Working paper, University of Texas at Austin.], M. Weber and Sarin 1993).

Suggested Citation

  • Elke U. Weber & Richard A. Milliman, 1997. "Perceived Risk Attitudes: Relating Risk Perception to Risky Choice," Management Science, INFORMS, vol. 43(2), pages 123-144, February.
  • Handle: RePEc:inm:ormnsc:v:43:y:1997:i:2:p:123-144

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
    2. Erik Brynjolfsson & Thomas W. Malone & Vijay Gurbaxani & Ajit Kambil, 1994. "Does Information Technology Lead to Smaller Firms?," Management Science, INFORMS, vol. 40(12), pages 1628-1644, December.
    Full references (including those not matched with items on IDEAS)

    More about this item


    risk; risk perception; risk attitudes; risky choice;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:43:y:1997:i:2:p:123-144. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.