Affective Influences on Risk-Taking and Avoidance

Abstract

The discipline of economics, and the study of decision-making under conditions of risk more broadly, is dominated by consequentialist models—that is, those characterizing decision-making as a rational evaluation of the costs, benefits, and associated probabilities of possible courses of action. Such models, however, fail to make sense of many of the most salient features of people’s treatment of risk. This chapter presents diverse examples of real-world behaviors that defy explanation by conventional accounts, including seemingly inconsistent patterns of risk-taking by the same individual across different decision domains, extreme risk-seeking or risk-averse behaviors, dissatisfaction with—and, relatedly, attempts at self-control to modify—one’s own risk-taking, and phenomena such as chickening out, information avoidance, and paradoxes within the realm of intertemporal choice. The authors argue that in order to explain these diverse patterns of risky decision-making, it is necessary to take account of two qualitatively different determinants of behavior—affect and deliberation—as well as interactions between the two. They briefly present a model of risk assessment and the associated behaviors and outcomes that incorporates both deliberative and affective processes to better characterize decision-making under risk.