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Willingness to take risk: The role of risk conception and optimism

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  • Thomas Dohmen
  • Simone Quercia
  • Jana Willrodt

Abstract

We show that the disposition to focus on favorable or unfavorable outcomes of risky situations affects willingness to take risk as measured by the general risk question. We demonstrate that this disposition, which we call risk conception, is strongly associated with optimism, a stable facet of personality and that it predicts real-life risk taking. The general risk question captures this disposition alongside pure risk preference. This enlightens why the general risk question is a better predictor of behavior under risk across different domains than measures of pure risk preference. Our results also rationalize why risk taking is related to optimism.

Suggested Citation

  • Thomas Dohmen & Simone Quercia & Jana Willrodt, 2018. "Willingness to take risk: The role of risk conception and optimism," CRC TR 224 Discussion Paper Series crctr224_2018_023, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_023
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    Cited by:

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    2. Johannes Brumm & Michael Grill & Felix Kubler & Karl Schmedders, 2023. "Re-use of collateral: Leverage, volatility, and welfare," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 19-46, January.
    3. Dietmar Fehr & Yannick Reichlin, 2021. "Status, Control Beliefs, and Risk-Taking," CESifo Working Paper Series 9253, CESifo.
    4. Armando N. Meier, 2021. "Emotions and Risk Attitudes," SOEPpapers on Multidisciplinary Panel Data Research 1118, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Armando N. Meier, 2019. "Emotions, Risk Attitudes, and Patience," SOEPpapers on Multidisciplinary Panel Data Research 1041, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. D’Exelle, Ben & Munro, Alistair & Verschoor, Arjan, 2024. "Agricultural investment behaviour and contingency: Experimental evidence from Uganda," World Development, Elsevier, vol. 173(C).

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    More about this item

    Keywords

    risk taking behavior; optimism; preference measures; risk conception;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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