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

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Listed:
  • Dohmen, Thomas

    () (University of Bonn and IZA)

  • Quercia, Simone

    () (University of Bonn)

  • 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, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11642
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    Keywords

    risk taking behavior; optimism; preference measures; risk conception;

    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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