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

37 Pages Posted: 9 Jul 2018

See all articles by Thomas J. Dohmen

Thomas J. Dohmen

Institute for the Study of Labor (IZA); Maastricht University - Business Investment Research Center (BIRC)

Simone Quercia

University of Bonn

Jana Willrodt

University of Bonn

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.

Keywords: risk taking behavior, optimism, preference measures, risk conception

JEL Classification: D91, C91, D81, D01

Suggested Citation

Dohmen, Thomas and Quercia, Simone and Willrodt, Jana, Willingness to Take Risk: The Role of Risk Conception and Optimism. IZA Discussion Paper No. 11642, Available at SSRN: https://ssrn.com/abstract=3209739

Thomas Dohmen (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Maastricht University - Business Investment Research Center (BIRC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-43-388 3832 (Phone)
+31-43-388 4856 (Fax)

Simone Quercia

University of Bonn ( email )

Institute for Applied Microeconomics
Adenauerallee 24 - 42
Bonn, 53113
Germany

Jana Willrodt

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

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