A Theory of Perceived Risk and Attractiveness

32 Pages Posted: 8 Jan 2009

See all articles by Elke U. Weber

Elke U. Weber

Princeton University - Department of Psychology

Carolyn Anderson

affiliation not provided to SSRN

Michael Birnbaum

California State University, Fullerton

Date Written: August 1992

Abstract

People judged both the attractiveness and risk of lotteries to win or lose money. The lotteries were designed to test whether risk and attractiveness judgments show systematic deviations from the simple sum of probability-by-utility-products analogous to (S)EU theory. Our results led to an alternative combination rule for probability and outcome information, with a relative weight averaging component and a configural (i.e., sign- or rank-dependent) probability weighting component. Ratings of risk and attractiveness were negatively correlated, but the two tasks showed systematic differences in the rank order of judgments. Both judgments could be fit by the same configural relative weight averaging model, but with different parameters (especially the sign-dependent probability weighting functions). Risk judgments were more sensitive to the probability of losses and zero outcomes compared to attractiveness judgments, which were more sensitive to the probability of gains. There were individual differences on the extent of this difference in probability weights between risk and attractiveness judgments.

Suggested Citation

Weber, Elke U. and Anderson, Carolyn and Birnbaum, Michael, A Theory of Perceived Risk and Attractiveness (August 1992). Organizational Behavior and Human Decision Processes, Vol. 52, No. 3, pp. 492-523, Available at SSRN: https://ssrn.com/abstract=1323463

Elke U. Weber (Contact Author)

Princeton University - Department of Psychology

Green Hall
Princeton, NJ 08540
United States

Carolyn Anderson

affiliation not provided to SSRN

Michael Birnbaum

California State University, Fullerton ( email )

800 N State College St
Fullerton, CA 92831
United States

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