Risk Seeking Research Articles

Reference-dependent discounting

Reference-dependence has become a widely established phenomenon in decision making under risk, not only for monetary outcomes but also for other outcomes, e.g., related to health. However, when the prospects involve risk about timing (the time of receipt of outcomes), rather than the outcomes themselves, much less is known about reference-dependence. This study extends discounted utility to incorporate reference-dependence and is the first to test it in timing prospects. We are also the first to estimate the probability weighting function for timing prospects. For both timing and outcome risk tasks, we replicate the typical fourfold pattern of risk attitudes: risk seeking for low-probability gains, risk aversion for high-probability gains, risk aversion for low-probability losses and risk seeking for high-probability losses. In other words, we find substantial pessimism with regard to high probabilities in the gain domain and low probabilities in the loss domain, and probabilistic optimism for low probabilities in the gain domain and high probabilities in the loss domain. Furthermore, we report loss aversion for outcome risks, while for timing risks, we find the opposite result, which we term earliness seeking. In sum, we find substantial empirical support for reference-dependent discounting. Our results show that psychological biases are also important when timing is risky, although the direction of bias may differ.

Optimal scheduling model using the IGDT method for park integrated energy systems considering P2G–CCS and cloud energy storage

To enhance the energy efficiency and financial gains of the park integrated energy system (PIES). This paper constructs a bi-level optimization model of PIES-cloud energy storage (CES) based on source-load uncertainty. Firstly, the scheduling framework of PIES with refined power-to-gas (P2G), carbon capture and storage (CCS) and CES coupling is constructed. Moreover, a bi-level optimization model with the upper tier subject being the PIES operator and the lower tier subject being the CES operator is established under the ladder-type carbon price mechanism with reward and punishment (LCPMRP). Then a proposed entropy weight adaptive information gap decision theory method (EAIGDT) is proposed to eliminate the subjectivity factor and retain its non-probabilistic features while dealing with multiple source-load uncertainties, and according to the operator’s risk preference to build risk-averse (RA) and risk-seeking (RS) strategies, respectively. Finally, the measured data in a certain area of Xinjiang verifies the proposed optimal scheduling method. The results show that the method can effectively take into account the interests of various subjects and realise PIES low-carbon economic operation.

Effect of decision-making principle on P2G–CCS–CHP complementary energy system based on IGDT considering energy uncertainty

As one of the most promising large-scale de-fossilization technologies currently available, Power-to-Gas (P2G) is expected to promote utilization of renewable sources and mitigate the effects of greenhouse gas. Through the coupling of P2G, Combined Heat and Power (CHP) as well as Carbon Capture and Storage (CCS), the P2G–CCS–CHP microgrid energy system could achieve hierarchical energy transfer and green-powered interconversion of gas, electricity and heat flows. However, the conversion of multiple energy shapes between different facilities is deeply intertwined with renewable energy sources, greatly increasing risk of unbalance operation and impacting the overall robustness and economic viability of system. To address these challenges, this study proposes a decision-making framework based on Information Gap Decision Theory (IGDT) method for a P2G–CCS–CHP system. The real-time balancing of heat & power loads and supply, the mechanism of gas-electricity-heat interaction, as well as recycling pattern of synthetic fuel within the system are carefully addressed to achieve optimal operation. Different scheduling schemes are obtained by setting up two separating decision principles, namely risk-seeking (RS) and risk-avoiding (RA), to solve these uncertainties and ensure robust decision making. Meanwhile, adaptability of decision-making methodology is analyzed based on several criteria including share of recycled green-powered fuel, ecological friendliness, carbon trading benefit, etc. Results show that adding of P2G module enables a 12.6% reduction in carbon emissions and generates 1252.2 kg of green powered gas, highlighting the eco-friendly nature of the multi energy system (MES). About 21.5% of the renewable energy flows participate the interconversion of electric-heat-gas and about 17.7% of total carbon flow is circulated as synthetic fuel within the system. In addition, conservative tendency is witnessed in the case of risk-seeking decision mode, leading to an approximate 13.22% increase in the operation costs, compared with risk-avoiding mode. The proposed IGDT decision strategy has shown significant compatibility in dealing with the impact of multiple uncertainties.

Modeling impulsivity and risk aversion in the subthalamic nucleus with deep brain stimulation

Risk evaluation is ubiquitous in decisions. Deep brain stimulation of the subthalamic nucleus is effective for Parkinson’s disease and obsessive–compulsive disorder, and can be associated with impulsivity and hypomania. Subthalamic stimulation has seemingly contrasting effects on impulsivity enhancing conflict-induced impulsivity but decreasing risk taking. Here, using a card gambling task paired with intracranial recordings (n = 25) and within-subject case control acute stimulation (n = 15) of the right subthalamic nucleus, we dissociated objective risk and uncertainty and subjective physiological markers of risk. Acute stimulation decreased risk taking (P = 0.010, Cohen’s d = 0.72) and increased subthalamic theta activity (P < 0.001, Cohen’s d = 0.72). Critically, stimulation negatively shifted the relationship between subthalamic physiology and a measure of evidence accumulation similar to observations with stimulation-induced conflict processing. This highlights the phenotypic and physiological heterogeneity of impulsivity, yet linking mechanisms underlying stimulation-induced conflict and risk. Finally, stimulation-induced risk seeking implicates the ventral subthalamic nucleus and dissociating anatomical and functional connectivity with the mesial prefrontal cortex. Our findings have implications for conceptualizations of impulsivity, and clinical relevance for neuropsychiatric disorders.

Connection Failure: Differences in White Matter Microstructure Are Associated with 5-HTTLPR but Not with Risk Seeking for Losses.

S/S carriers of 5-HTTLPR have been found to be more risk seeking for losses compared to L/L carriers. This finding may be the result of reduced top-down control from the frontal cortex due to altered signal pathways involving the amygdala and ventral striatum. The serotonergic system is known to be involved in neurodevelopment and neuroplasticity. Therefore, the aim of this study was to investigate whether structural differences in white matter can explain the differences in risk-seeking behaviour. Lower structural connectivity in S/S compared to L/L carriers and a negative relationship between risk seeking for losses and connectivity were assumed. Diffusion-weighted imaging was used to compute diffusion parameters for the frontostriatal and uncinate tract in 175 genotyped individuals. The results showed no significant relationship between diffusion parameters and risk seeking for losses. Furthermore, we did not find significant differences in diffusion parameters of the S/S vs. L/L group. There were only group differences in the frontostriatal tract showing stronger structural connectivity in the S/L group, which is also reflected in the whole brain approach. Therefore, the data do not support the hypothesis that the association between 5-HTTLPR and risk seeking for losses is related to differences in white matter pathways implicated in decision-making.

Investigating The Leddo, Jayanti and Duan (2019) Revised Prospect Theory Value Function in Argentina

Prospect Theory (Kahneman and Tversky, 1979) is a highly influential theory that predicts decision making when people are confronted with choices involving gains or losses with different degrees of uncertainty. Prospect Theory argues that people are generally risk averse when it comes to seeking gains and risk seeking when it comes to avoiding losses. Leddo et al. (2019) noted that the original formulation of Prospect Theory did not take into account people’s goals. They argued that people would be willing to take risks to achieve goals but become more risk averse once those goals are achieved, and they would become risk averse when confronted with losses in order to avoid a highly negative outcome but become more risk seeking to negate the negative outcome once that outcome occurred. Leddo et al.’s research confirmed this hypothesis, leading to a revision of Prospect Theory’s value function. The present research investigates whether the same revised value function can predict decisions made by people in other cultures. Accordingly, the present paper investigates whether the Leddo et al. (2019) findings will hold up with people from Argentina, a high-income country with a mixed economic system. In the present study 82 Argentine residents from the ages 15-75 were given scenarios involving sports decisions involving gains or losses above or below defined aspiration and avoidance levels (four scenarios in total with an average of 17 participants per scenario). Results showed that participants demonstrated the same frequency of risk-seeking behaviors for decisions involving losses than those involving gains, inconsistent with the original Kahneman and Tversky (1979) framework and consistent with the revised Leddo et al. (2019) framework. Additionally, participants showed more risk seeking behaviors for decisions involving outcomes below the avoidance and aspiration levels than for decisions involving outcomes above the avoidance and aspiration levels, consistent with the revised Leddo et al. (2019) framework. This held up individually for both gains and losses.

Risk and time preferences in individuals with lifestyle-related and non-lifestyle-related cardiovascular diseases: a pilot study

ObjectivesTo (1) pilot a study of behavioural characterisation based on risk and time preferences in clinically well-characterised individuals, (2) assess the distribution of preferences in this population and (3) explore...

To behave or not (un)ethically? The meditative effect of mindfulness on statistics anxiety and academic dishonesty moderated by risk aversion

Despite the growing interest in mindfulness in higher education, the literature on its relation to decision-making under risk (i.e. academic misconduct) and statistics anxiety is scarce. The present research shall fill this gap. Based on the prospect theory, we assessed the mediating effect of mindfulness on the relationship between statistics anxiety and academic dishonesty moderated by risk aversion. Data were collected from 791 undergraduate students in six Israeli academic institutions studying for bachelor’s degrees in social sciences. Questionnaires included the following measures: risk behaviour according to the prospect theory framework, Mindful Attention Awareness Scale, Statistics Anxiety Rating Scale, Academic Misconduct Scale and sociodemographic variables. Correlations among these variables were explored. The data was analysed using Structural Equation Modelling (SEM). The results indicate that the variance in academic dishonesty is explained by students' statistics anxiety with a mediation of Mindfulness moderated by Risk Aversion. Mindfulness negatively affects Academic Dishonesty, while Risk Aversion has a significant positive effect on Mindfulness. Finally, among individuals with high statistics anxiety, Risk Averse individuals show significantly higher Mindfulness than Risk Seekers. We conclude that mindfulness-based interventions might be a constructive tool to reduce risk-taking and promote ethical decision-making among individuals who experience high levels of statistics anxiety. Furthermore, developing mindful skills may help individuals with higher anxiety levels neutralize these unwanted feelings and get along with their learning tasks. Hence, avoid academic unethical behaviours.

Job changing frequency and experimental decisions: A field study of migrant workers in the manufacturing industry

Migrant workers form an important part of the labor force in the economic development of many countries. Their turnover decisions may affect the performance of manufacturing industries. It is therefore important to understand what kind of individual behavioral preferences affect their job changing frequency. In this study, a lab-in-the-field experiment was conducted through a large online-to-offline job-matching platform to elicit manufacturing migrant workers' preferences, such as uncertainty attitudes, intertemporal choices and social preferences, especially difference aversion. We found that subjects who were more risk seeking changed jobs more frequently. We also used job record data from the platform and conducted an empirical analysis to investigate one explanation for this result: risk-seeking subjects possess more optimistic expectations of potential job opportunities and are more likely to sample different jobs and thus generate higher job changing frequency. Our findings may help policy-makers and employers design policies or mechanisms to prevent excessive job-changing behavior.

Impact of risk preferences on evacuee behavior and attention distribution in urban underground space evacuations

Evacuation and conducting emergency rescue operations in underground spaces pose substantial challenges. However, limited work has been done to investigate how evacuees’ heterogeneity influence the evacuation efficiency. In this study, we conducted virtual environment experiment and on-site experiment to analyze the physical behavior and attention distribution of evacuees with different risk preferences during route selections. A total of 30 participants were clustered into three groups: Risk Averter (RA), Risk Neuter (RN) and Risk Seeker (RS), based on the proportion of choosing safe detours. Eye metrics analysis revealed that RA allocated more time to gaze at risk elements, whereas RS tended to pay more attention to the route distance (P =0.003). The total fixation time for RA and RS was about 300 ms longer than RN (P =0.007), indicating that RN exhibited more cautious behavior pattern when selecting an evacuation route. In addition, all participants displayed a noticeable gaze bias towards potential choices during the decision-making process. Specifically, gaze likelihood increased and exceeded 50% at 300–400 ms before decisions were made. Additionally, evacuation models were established based on AnyLogic to investigate the influence of evacuees’ risk preference on evacuation efficiency. The evacuation simulation results demonstrated a significant improvement in evacuation efficiency when all evacuees adopted a risk-averse approach. This resulted in a reduction of evacuation time by 12.07–28.84% compared to the benchmark condition. The findings offer valuable insights into the behavior prediction in the evacuation simulation and emergency management in urban underground spaces.

Prospect theory and asset allocation

We study the asset allocation of an investor with prospect theory (PT) preferences. First, we solve analytically the two-asset problem of the PT investor for one risk-free and one risky asset and find that the reference return and the level of risk aversion or risk seeking (diminishing sensitivity) affect differently less ambitious and more ambitious investors: the less ambitious investor decreases her exposure to the risky asset when increasing her reference return or the level of diminishing sensitivity, while the more ambitious investor increases her exposure to the risky asset when increasing her reference return or the level of diminishing sensitivity. However, both less and more ambitious investors decrease their exposures to the risky asset when increasing their degrees of loss aversion. In a comprehensive sensitivity analysis, we investigate how different aspects of the PT investor’s preferences contribute to her risk taking, performance and happiness. We observe, for instance, that the investor’s happiness decreases with her increasing level of ambition. Second, we perform simulations to examine concrete solutions of the theoretical two-asset problem for different types of the PT investor and for different characteristics of the risky asset and find that the assumption of skewness, as opposed to symmetry, changes the optimal investment in the risky asset. Third, we empirically investigate the performance of a PT portfolio when diversifying among a stock market index, a government bond and gold, in Europe and the US. We focus on investors with PT preferences under different scenarios regarding the reference return and the degree of loss aversion and compare their portfolio performance with the performance of investors under mean–variance (MV), linear loss averse and CVaR preferences. We find that, in the US, PT portfolios significantly outperform MV portfolios (in terms of returns) in most cases.

Dissociation and other trauma symptomatology are linked to imbalance in the competing neurobehavioral decision systems.

Dissociation is a conscious state characterized by alterations in sensation and perception and is thought to arise from traumatic life experiences. Previous research has demonstrated that individuals with high levels of dissociation show impairments in cognitive-emotional processes. Therefore, using the Competing Neurobehavioral Decisions System (CNDS) theory, we used statistical modeling to examine whether dissociative experience and trauma symptoms are independently predicted by impulsivity, risk-seeking, affective state (i.e., anxiety, depression, stress, and negative affect), and trauma history. In this cross-sectional study design, data were collected via Amazon Mechanical Turk from a total of n = 557 English-speaking participants in the United States. Using Qualtrics, participants answered a series of self-reported questionnaires and completed several neurocognitive tasks. Three independent multiple linear regression models were conducted to assess whether impulsivity, risk seeking, affective state, and trauma history predict depersonalization, trauma symptoms, and PTSD symptoms. As hypothesized, we found that depersonalization and other trauma symptoms are associated with heightened impulsivity, increased risk-seeking, impaired affective states, and a history of traumatic experiences. We demonstrate that an imbalanced CNDS (i.e., hyperimpulsive/hypoexecutive), as evidenced by decreased future valuation, increased risk seeking, and impaired affective states, predicts heightened depersonalization and other trauma and PTSD symptomatology. This is the first time that dissociation has been connected to delay discounting (i.e., the tendency to place more value on rewards received immediately compared to farther in the future). Interventions that positively impact areas of the CNDS, such as episodic future thinking or mindfulness meditation, may be a target to help decrease dissociative symptoms.

A unified formula of the optimal portfolio for piecewise hyperbolic absolute risk aversion utilities

We propose a general family of piecewise hyperbolic absolute risk aversion (PHARA) utilities, including many classic and non-standard utilities as examples. A typical application is the composition of a HARA preference and a piecewise linear payoff in asset allocation. We derive a unified closed-form formula of the optimal portfolio, which is a four-term division. The formula has clear economic meanings, reflecting the behavior of risk aversion, risk seeking, loss aversion and first-order risk aversion. We conduct a general asymptotic analysis to the optimal portfolio, which directly serves as an analytical tool for financial analysis. We compare this PHARA portfolio with those of other utility families both analytically and numerically. One main finding is that risk-taking behaviors are greatly increased by non-concavity and reduced by non-differentiability of the PHARA utility. Finally, we use financial data to test the performance of the PHARA portfolio in the market.

A Continuous Time Framework for Sequential Goal-Based Wealth Management

We develop a continuous time framework for sequential goals-based wealth management. A stochastic factor process drives asset price dynamics and the client’s goal amount and income. We prove the weak dynamic programming principle for the value function of our control problem, which we show to be the unique viscosity solution of the corresponding Hamilton-Jacobi-Bellman equation. We develop an equivalent and computationally efficient representation of the Hamiltonian, which yields the optimal portfolio within a factor-dependent opportunity set defined by the maximum and minimum variance hypersurfaces. Our analysis shows that it is optimal to fund an expiring goal up to the level where the marginal benefit of additional fundedness is exceeded by the opportunity cost of diverting wealth from future goals. An all-or-nothing investor is more risk averse toward an approaching goal deadline if well funded, but more risk seeking if not on track with upcoming goals, compared with an investor with flexible goals. This paper was accepted by David Simchi-Levi, finance. Funding: This work was supported by the Natural Sciences and Engineering Research Council of Canada [Discovery Grant RGPIN-2020-06290] and Fi-Tek.

Daily Cannabis Use: Do Impulsivity and Sensation Seeking Predict Negative Cannabis Related Consequences?

Objective Cannabis use can result in negative cannabis-related consequences (NCRC), particularly among individuals high in impulsivity and sensation seeking. Continued research is necessary to determine if these associations generalize to community adults with daily legal cannabis use. We hypothesized that impulsivity and sensation seeking would positively predict NCRC. Method Community adults ( N = 51) participated in a study measuring personality, cannabis use, and related outcomes, as part of a larger study. Two multiple regression models predicting NCRC were conducted: one for impulsivity facets and one for sensation seeking facets. Results Positive urgency was significantly negatively associated with NCRC. Risk seeking was significantly positively associated with NCRC. All other personality facets were not significantly associated with NCRC. Conclusions Associations between some personality facets and NCRC may differ among adults with daily legal cannabis use. Future research should continue to explore unique personality associations related to NCRC among individuals with daily use.

Risk preference as an outcome of evolutionarily adaptive learning mechanisms: An evolutionary simulation under diverse risky environments.

The optimization of cognitive and learning mechanisms can reveal complicated behavioral phenomena. In this study, we focused on reinforcement learning, which uses different learning rules for positive and negative reward prediction errors. We attempted to relate the evolved learning bias to the complex features of risk preference such as domain-specific behavior manifests and the relatively stable domain-general factor underlying behaviors. The simulations of the evolution of the two learning rates under diverse risky environments showed that the positive learning rate evolved on average to be higher than the negative one, when agents experienced both tasks where risk aversion was more rewarding and risk seeking was more rewarding. This evolution enabled agents to flexibly choose more reward behaviors depending on the task type. The evolved agents also demonstrated behavioral patterns described by the prospect theory. Our simulations captured two aspects of the evolution of risk preference: the domain-specific aspect, behavior acquired through learning in a specific context; and the implicit domain-general aspect, corresponding to the learning rates shaped through evolution to adaptively behave in a wide range of environments. These results imply that our framework of learning under the innate constraint may be useful in understanding the complicated behavioral phenomena.

ASSESSING MULTIDIMENSIONAL SCALE OF LOW SELF-CONTROL IN MALAYSIAN PROPERTY CRIMES PRISONERS

The increasing incidence of criminal and delinquent behaviour has received a lot of attention. The Low Self-Control Scale (LSCS) developed by Grasmick et al. (1993) has been significant in our understanding of the role of self-control in that behaviour. The purpose of this study is to look into the psychometric properties of the Malay language modified multidimensional LSCS among 181 property crime convicts in Malaysia prisoner. The validity and reliability of the LSCS second-order reflection measurement model were investigated using the partial least square structural equation modelling (PLS-SEM) method. The findings demonstrate that the six LSCS constructs (temper, easy tasks, self-centered, risk seeking, physicality, and impulsivity), as well as the 23 indicators, can explain the concept of low self-control. This research proved the construct reliability, discriminant validity, and convergent validity of the LSCS’s Malay version. In addition, this research also demonstrated that prisoners disclosed themselves high on each LSCS’s constructs, having the highest ratings on impulsivity and the lowest on temper. In conclusion, the psychometric evidence of LSCS in this study will be catalyzed for future studies of individual self-control in delinquent or criminal behavior.

PERILAKU PEMBELIAN PRODUK FASHION MEWAH PALSU PADA KONSUMEN DI JAKARTA

The flow of globalization makes world development more advanced. this has a positive impact but also a negative impact. One area that has seen an impact from globalization is the fashion industry. The progress of the fashion industry which is getting better and more diverse makes people compete to buy trending products. In addition, globalization has also caused people's lifestyles to change, and they tend to be more consumptive. Primary data was obtained by distributing questionnaires to measure seven variables, namely: integrity, materialism, risk seeking, price-quality inference, self-perception of smart shopper, subjective norm and value awareness of the purchase intention of counterfeit luxury fashion products. This study uses the T-test analysis, with the results showing that the factors that influence the purchase intention of counterfeit luxury fashion products are risk-seeking factors that are positively related to the purchase intention of counterfeit luxury fashion products. This is supported by the dominance of the sample, namely that around 71 people (70.3%) were female and the ages of the respondents mostly ranged from 16-25 years for a total of 95 people (94.1%) who turned out to be the dominant occupation of the respondents as 90 students (98.1%). This is related to the income data of this study, which shows that respondents with no income dominate as many as 37 people (36.6%); the difference is thin with respondents who earn Rp. 1,000,000 - Rp. 2,000,000 as many as 32 people (31.7%), because the dominant respondent is still a student or college student. So, it can be concluded that risk seeking is positively related to the intention to purchase fake luxury fashion products because students have the attitude to be ready to bear the risks that will arise after buying fake luxury fashion products.Keywords: Purchasing; Counterfeit; Luxury Product; Risk Seeking

Framing effects in disaster risk communication: the case of coastal erosion in the United States

ABSTRACT Governments have the duty to protect their citizens and to prevent natural hazards from turning into disasters. Therefore, they need to communicate effectively about disaster risk to potentially affected populations. We conducted three online survey experiments among United States residents (total N = 1673) to investigate how satellite images combined with information on past events of coastal erosion affect potential framing effects inherent to disaster risk communication. We found a strong framing effect in a decision scenario about human lives, which was reduced when adding an icon array to show the scenario. However, when validating these findings in a more realistic scenario in the context of coastal erosion, we found no framing effects in a risky choice situation and a goal framing setup. Adding satellite images to the textual description of the scenario made respondents more risk seeking and increased their stated behavioural intention to take preventive measures against coastal erosion. The overall awareness among respondents about the issue of coastal erosion was high, resulting in few risky choices and high levels of stated behavioural intentions. Our findings cast doubt on the strength of framing effects in real world scenarios, especially when people hold strong preferences about the issue at stake.

Leadership and Entrepreneurship: Evidence from a Chinese Household Survey

Abstract This study investigates the role of leadership in entrepreneurship. Using data from a representative household survey in China, we find that people who demonstrate leadership in their adolescence are more likely to become entrepreneurs. This finding is robust to controlling various sets of control variables and various forms of fixed effects. Better venture performance, rather than more risk seeking, seems to be a potential mechanism through which leadership is related to entrepreneurship. JEL classification numbers: L26, M13. Keywords: Leadership, Entrepreneurship, Venture Performance.