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Willingness to Take Risk: The Role of Risk Conception and Optimism

Author

Listed:
  • Dohmen, Thomas

    (University of Bonn)

  • Quercia, Simone

    (University of Verona)

  • Willrodt, Jana

    (Düsseldorf Institute for Competition Economics (DICE))

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

  • Dohmen, Thomas & Quercia, Simone & Willrodt, Jana, 2018. "Willingness to Take Risk: The Role of Risk Conception and Optimism," IZA Discussion Papers 11642, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp11642
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    Cited by:

    1. Armando N. Meier, 2021. "Emotions and Risk Attitudes," SOEPpapers on Multidisciplinary Panel Data Research 1118, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. Armando N. Meier, 2019. "Emotions, Risk Attitudes, and Patience," SOEPpapers on Multidisciplinary Panel Data Research 1041, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. 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.
    4. Micaela Pinho & Sofia Gomes, 2024. "Unveiling the Impact of Personality in Lifestyle Solidarity: An Exploratory Study of the Effects of Dispositional Optimism and Risk Orientation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 15833-15859, December.
    5. D’Exelle, Ben & Munro, Alistair & Verschoor, Arjan, 2024. "Agricultural investment behaviour and contingency: Experimental evidence from Uganda," World Development, Elsevier, vol. 173(C).
    6. Arslan, Ruben C. & Brümmer, Martin & Dohmen, Thomas & Drewelies, Johanna & Hertwig, Ralph & Wagner, Gert G., 2020. "How people know their risk preference," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 10.
    7. repec:ces:ceswps:_9253 is not listed on IDEAS
    8. Micaela Pinho & Mara Madaleno, 2024. "Willingness to pay more health taxes? The relevance of personality traits and situational effects," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 23(1), pages 1-31, December.

    More about this item

    Keywords

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    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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