Evaluating Risk Attitudes Across Cultures
01 Oct 2019-pp 1535-1539
TL;DR: It was found Brazilians and Indians present the same attitude when facing risk situations, being risk averse, and this information serves as an input to consider when negotiating with a counterpart from different cultures.
Abstract: Decision-making under risk or uncertainty is quite common in various environments. According to decision-maker’s preferences, there are three types of attitudes toward risk: risk averse, risk prone or risk neutral. The aim of this work is to perform a cross-cultural analyzes of the risk preferences of subjects who belong to two different cultures. A questionnaire is applied with Brazilians and Indians to capture their preferences in order to observe the attitudes towards risk and check if they act in different way. Using the concept of Certainty Equivalent, it was found they present the same attitude when facing risk situations, being risk averse. At the end of this step, the information serves as an input to consider when negotiating with a counterpart from different cultures.
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TL;DR: In this paper, the authors present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.
Abstract: This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low prob- abilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling. EXPECTED UTILITY THEORY has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (24), and widely applied as a descriptive model of economic behavior, e.g. (15, 4). Thus, it is assumed that all reasonable people would wish to obey the axioms of the theory (47, 36), and that most people actually do, most of the time. The present paper describes several classes of choice problems in which preferences systematically violate the axioms of expected utility theory. In the light of these observations we argue that utility theory, as it is commonly interpreted and applied, is not an adequate descriptive model and we propose an alternative account of choice under risk. 2. CRITIQUE
35,067 citations
"Evaluating Risk Attitudes Across Cu..." refers background in this paper
...In a deep literature review, [5] found that when the context is loss, most of people are risk seeking and in the case contrary is risk-averse in gain domain....
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Book•
01 Jan 1976TL;DR: In this article, a confused decision maker, who wishes to make a reasonable and responsible choice among alternatives, can systematically probe his true feelings in order to make those critically important, vexing trade-offs between incommensurable objectives.
Abstract: Many of the complex problems faced by decision makers involve multiple conflicting objectives. This book describes how a confused decision maker, who wishes to make a reasonable and responsible choice among alternatives, can systematically probe his true feelings in order to make those critically important, vexing trade-offs between incommensurable objectives. The theory is illustrated by many real concrete examples taken from a host of disciplinary settings. The standard approach in decision theory or decision analysis specifies a simplified single objective like monetary return to maximise. By generalising from the single objective case to the multiple objective case, this book considerably widens the range of applicability of decision analysis.
8,895 citations
1,738 citations
"Evaluating Risk Attitudes Across Cu..." refers background in this paper
...As proposed by [13], it is possible to measure risk aversion by associating to the curvature of the utility function: if an individual is neutral risk it can be observed by a linear function; if the function is concave it means the individual is risk averse....
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Posted Content•
TL;DR: The authors found that respondents from the P.R.C., U.S.A., Germany, and Poland were significantly less risk-averse in their pricing than Americans when risk preference was assessed in the traditional expected utility framework.
Abstract: In this study, respondents from the P.R.C., U.S.A., Germany, and Poland were found to differ in risk preference, as measured by buying prices for risky financial options. Chinese repondents were significantly less risk-averse in their pricing than Americans when risk preference was assessed in the traditional expected-utility framework. However these apparent differences in risk preference were associated primarily with cultural differences in the perception of the risk of financial options rather than with cultural differences in attitude towards perceived risk. In all cultures, and equal proportion(the majority) of respondents was willing to pay more for options perceived as less risky, i.e., were perceived-risk averse. These results are most natually explained within a risk-return conceptualization of risky choice. They have practical implications for cross-cultural negotiation and commerce by suggesting the locus of cultural differences in risky choice that may allow for the creation of joint gains.
789 citations
TL;DR: The authors developed a psychometrically sound measure of Hofstede's culture at the individual level, called CVSCALE, which is a 26-item five-dimensional scale of individual cultural values.
Abstract: Hofstede's (1980 and 2001) renowned five-dimensional measure of cultural values is the overwhelmingly dominant metric of culture. His measure has been used as a contextual variable, but it is often required to directly measure cultural values for individual consumers or managers. The purpose of this research is to respond to the call for developing a psychometrically sound measure of Hofstede's culture at the individual level. Past research in this area has developed a scale for only one of Hofstede's dimensions, a highly work-oriented scale, or a scale with poor reliability. By overcoming every major weakness of past studies, this research offers CVSCALE, a 26-item five-dimensional scale of individual cultural values that assesses Hofstede's cultural dimensions at the individual level. The scale shows adequate reliability, validity, and across-sample and across-national generalizability.
588 citations