People's perception of others' risk preferences

AbstractOur everyday decisions are driven by costs, risk, and reward. How do people take these factors into account when they pre- dict and explain the decisions of others? In a two-part experiment, we assessed people’s perceptions of other people’s risk preferences, relative to their own. In Part 1, participants re- ported their relative preference between a guaranteed payout and lotteries with various probabilities and payouts, and made predictions about other people’s preferences. In Part 2, participants estimated the lottery payout that generated a given relative preference between a guaranteed payout and a lottery, both for themselves and others. We found considerable individual variability in how people perceive the risk preferences of others relative to their own, and consistency in people’s perceptions across our two measures. Future directions include formal computational models and developmental studies of how we think about our own and each other’s decision-making.

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