Risk perception and acceptance--one process or two? The impact of aspirations on perceived risk and preferences

The experiments discussed here are aimed at determining whether risk perception and risk acceptance are two distinct psychological processes. This study is motivated by the idea of a double-criterion model of choice. In particular, in line with risk-value (R-V) models, in which risk is treated as a primitive, it is tested whether risk is independent of aspirations and whether preferences depend on aspirations. In two experiments, 305 university students were presented with pairs of risky projects and were asked to compare their riskiness and select one. The aspiration level, defined as the target return on the project, was set through an explicit instruction. In Experiment 1, a within-subject designwas applied, and thus aspirations were set at two different levels. In Experiment 2, with a between-subject design, two different aspiration levels were set for each group. The results indicate that risk ordering is insensitive to changes in aspirations, but preferences are sensitive to those changes. This supports distinctness of risk perception and risk acceptance. The findings are discussed in terms of the CPT and SP/A models and the R-V approach. It appears that double-criterion models provide better and psychologically sounder predictions of subjects' preferences.