Decisions under uncertainty: Psychological, economic, and neuroeconomic explanations of risk preference

Abstract

Psychological and neuroscience studies of risk-taking have identified wide range of factors some exogenous and some endogenous that influence risk-taking. Multiple processes are in play when a preference between different risky options is constructed. As decision-makers with limited attention and processing capacity, one needs to be selective in what information is useful, and have to find shortcuts to process it. Situational characteristics, like the way in which information about choice options is presented, or the nature of the task, influence risk-taking by focusing the attention on different subsets of information or by facilitating different relative comparisons in search for the better option. Characteristics of the decision-maker often interact with characteristics of the situation in determining risk-taking. This is either because different decision-makers use different processes to different degrees or because the same processes result in different output. For instance, decision-makers familiar with a choice domain may experience positive emotions such as comfort or confidence when contemplating risky options in that domain, whereas decision-makers unfamiliar with the domain will experience negative emotions such as anxiety. © 2009 Elsevier Inc. All rights reserved.