Perceived risk attitudes: relating risk perception to risky choice
Article Abstract:
Two studies were performed to determine if cross-situational differences in choice behavior should be defined in the expected utility framework as variabilities in risk attitude or as variabilities in the perception of the relative riskiness of choice options as facilitated by risk-return interpretations of utility functions. In particular, they aimed to prove that the ability of situational variables to influence people's risk choices does not automatically mean that stable individual differences in risk preference are not measurable. The studies proved that a definition of risk aversion and risk seeking as the preference for options perceived to be of greater or less risk offers the cross-situational stability to the risk preference of a person that more conventional definitions have failed to capture.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1997
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The risk-averse (and prudent) newsboy
Article Abstract:
The impact of risk and risk aversion in the single-period inventory problem, otherwise known as the newsboy problem, is investigated. The newsboy problem, when applied to a manufacturing context, is demonstrated in such areas as plant capacity, overbooking and target production levels. For the study, comparative-static effects of changes in the different price and cost measures are identified and related to the risk aversion of the newsboy. Moreover, the examination look on the impact of adding random background wealth and riskiness of newspaper demand. Results show that most of the comparative effects are largely vague although certain simple restrictions on preferences and risk increases are discovered to result in qualitatively deterministic outcomes.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1995
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