The importance of risk-aversion as a measurable psychological parameter governing risk-taking behaviour

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Abstract

A utility function with risk-aversion as its sole parameter is developed and used to examine the well-known psychological phenomenon, whereby risk averse people adopt behavioural strategies that are extreme and apparently highly risky. The pioneering work of the psychologist, John W. Atkinson, is revisited, and utility theory is used to extend his mathematical model. His explanation of the psychology involved is improved by regarding risk-aversion not as a discrete variable with three possible states: risk averse, risk neutral and risk confident, but as continuous and covering a large range. A probability distribution is derived, the "motivational density", to describe the process of selecting tasks of different degrees of difficulty. An assessment is then made of practicable methods for measuring risk-aversion.
Original languageEnglish
Title of host publication2013 Joint IMEKO (International Measurement Confederation) TC1-TC7-TC13 Symposium: Measurement Across Physical and Behavioural Sciences
Subtitle of host publication4–6 September 2013, Genoa, Italy
PublisherIOP Publishing
Number of pages6
DOIs
Publication statusPublished - 2013
Event13th Joint IMEKO TC1-TC7-TC13 Symposium Measurement across physical and behavioural sciences: 4-6 September, Genova, Palazzo Ducale – ITALY - Genoa, Italy
Duration: 4 Sep 20136 Sep 2013
Conference number: 13

Publication series

NameJournal of Physics: Conference Series
PublisherIOP Publishing
Number1
Volume459
ISSN (Print)1742-6588
ISSN (Electronic)1742-6596

Conference

Conference13th Joint IMEKO TC1-TC7-TC13 Symposium Measurement across physical and behavioural sciences
CountryItaly
CityGenoa
Period4/09/136/09/13

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