Three gaps and what they may mean for risk preference

Area of Science:

• Behavioral Sciences
• Decision-Making Theories
• Psychology
• Economics

Background:

• Risk preference is a core concept in choice theories across behavioral sciences.
• Economics traditionally views risk preference through monetary payoff variance, often using behavioral measures.
• Psychology often defines risk preference as the propensity for potentially harmful behaviors, relying on self-reports.

Purpose of the Study:

• To review and address three key gaps arising from distinct measurement traditions in risk preference research.
• To investigate the description-experience, behavior-self-report, and temporal stability gaps in risk preference assessment.
• To evaluate the validity and predictive power of different risk preference measurement approaches.

Main Methods:

• Literature review of studies employing behavioral and self-report measures of risk preference.
• Analysis of existing research to identify discrepancies and convergences between measurement traditions.
• Synthesis of findings regarding the reliability and validity of different risk preference assessment tools.

Main Results:

• A description-experience gap indicates behavioral measures can yield inconsistent assessments of risk appetite.
• A behavior-self-report gap highlights that self-report measures exhibit convergent validity, unlike behavioral ones.
• Self-reports demonstrate significant temporal stability, whereas behavioral measures do not, suggesting risk preference is a stable trait when self-reported.

Conclusions:

• Risk preference, particularly when measured via self-reports, functions as a moderately stable psychological trait with general and domain-specific aspects.
• Future research must bridge the identified gaps between behavioral and self-report measurement traditions.
• Investigating the differential predictive validity of these measures for economic, health, and well-being outcomes is crucial.