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Can Personality Type Explain Heterogeneity in Probability Distortions?

  • C. Monica Capra
  • Bing Jiang
  • Jan Engelmann
  • Gregory Berns

There are two regularities we have learned from experimental studies of choice under risk. The first is that the majority of people weigh objective probabilities non-linearly. The second regularity, although less commonly acknowledged, is that there is a large amount of heterogeneity in how people distort probabilities. Despite this, little effort has been made to identify the source of heterogeneity. In this paper, we explore the possibility that the probability distortions are linked to the personality profile of the decision-maker. Using four widely utilized personality tests, we classify participants into three distinct personality types and find that these types have different risk characteristics. Particularly, the trait of motivation plays a role in explaining the attraction of gambling, while the trait of impulsiveness affects the discriminability of non-extreme probabilities. Our results suggest heterogeneity in probability distortions may be explained by personality profiles, which can be elicited though standard questionnaires.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 1205.

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Date of creation: Apr 2012
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Handle: RePEc:emo:wp2003:1205
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  1. Tversky, Amos & Wakker, Peter, 1995. "Risk Attitudes and Decision Weights," Econometrica, Econometric Society, vol. 63(6), pages 1255-80, November.
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  7. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, 06.
  8. George Wu & Richard Gonzalez, 1999. "Nonlinear Decision Weights in Choice Under Uncertainty," Management Science, INFORMS, vol. 45(1), pages 74-85, January.
  9. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, 08.
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  11. Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March.
  12. Gregory S. Berns & C. Monica Capra & Sara Moore & Charles Noussair, 2007. "A shocking experiment: New evidence on probability weighting and common ratio violations," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 234-242, August.
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