Axiomatic measures of perceived risk: Some tests and extensions

The history of axiomatic measurement of perceived risk of unidimensional risky choice alternatives is briefly reviewed. Experiments 1 and 2 present data that distinguish between two general classes of risk functions (those that assume that gain and loss components of an alternative combine additivel...

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Bibliographic Details
Published in:Journal of behavioral decision making 1989-04, Vol.2 (2), p.113-131
Main Authors: Weber, Elke U., Bottom, William P.
Format: Article
Language:English
Subjects:
Allais paradox
Axiomatic measures of risk
Perceived risk
Reflection effect
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Summary:The history of axiomatic measurement of perceived risk of unidimensional risky choice alternatives is briefly reviewed. Experiments 1 and 2 present data that distinguish between two general classes of risk functions (those that assume that gain and loss components of an alternative combine additively versus multiplicatively) on empirical grounds. The most viable risk model on the basis of these and other results is described. Experiment 3 presents data that call into question the descriptive adequacy of some of this risk model's assumptions, in particular the expectation principle. Suggestions for possible modifications are made.
ISSN:0894-3257
1099-0771
DOI:10.1002/bdm.3960020205