Risk Preferences and Aging: The 'Certainty Effect' in Older Adults’ Decision Making

Mather, Mara, Nina Mazar, Marissa A. Gorlick, Nichole R. Lighthall, Jessica Burgeno, Andrej Schoeke, and Dan Ariely (2012): Risk Preferences and Aging: The “Certainty Effect” in Older Adults’ Decision Making, Psychology and Aging, 27 (4), 801-816.

61 Pages Posted: 13 May 2012 Last revised: 20 May 2013

See all articles by Mara Mather

Mara Mather

University of Southern California

Nina Mazar

Boston University - Questrom School of Business

Marissa Gorlick

University of Texas at Austin

Nichole Lighthall

University of Southern California

Jessica Burgeno

University of Southern California - Davis School of Gerontology

Andrej Schoeke

University of Southern California - Davis School of Gerontology

Dan Ariely

Duke University - Fuqua School of Business

Date Written: May 10, 2012

Abstract

A prevalent stereotype is that people become less risk taking and more cautious as they get older. However, in laboratory studies, findings are mixed and often reveal no age differences. In the current series of experiments, we examined whether age differences in risk seeking are more likely to emerge when choices include a certain option (a sure gain or a sure loss). In four experiments, we found that age differences in risk preferences only emerged when participants were offered a choice between a risky and a certain gamble but not when offered two risky gambles. In particular, Experiments 1 and 2 included only gambles about potential gains. Here, compared with younger adults, older adults preferred a certain gain over a chance to win a larger gain and thus, exhibited more risk aversion in the domain of gains. But in Experiments 3 and 4, when offered the chance to take a small sure loss rather than risking a larger loss, older adults generally exhibited more risk seeking in the domain of losses than younger adults. In a nutshell, our findings suggest that older adults weigh certainty more heavily than younger adults.

Keywords: Certainty Effect, Risk Seeking, Risk Aversion, Older Adults, Young Adults, Emotions, Affect

Suggested Citation

Mather, Mara and Mazar, Nina and Gorlick, Marissa and Lighthall, Nichole and Burgeno, Jessica and Schoeke, Andrej and Ariely, Dan, Risk Preferences and Aging: The 'Certainty Effect' in Older Adults’ Decision Making (May 10, 2012). Mather, Mara, Nina Mazar, Marissa A. Gorlick, Nichole R. Lighthall, Jessica Burgeno, Andrej Schoeke, and Dan Ariely (2012): Risk Preferences and Aging: The “Certainty Effect” in Older Adults’ Decision Making, Psychology and Aging, 27 (4), 801-816. . Available at SSRN: https://ssrn.com/abstract=2055744

Mara Mather (Contact Author)

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Nina Mazar

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Marissa Gorlick

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Nichole Lighthall

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Jessica Burgeno

University of Southern California - Davis School of Gerontology ( email )

3715 McClintock Ave.
Rm 351
Los Angeles, CA 90089-0191
United States

Andrej Schoeke

University of Southern California - Davis School of Gerontology ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Dan Ariely

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 381-4366 (Phone)

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