A descriptive measure of risk

Abstract A measure of the perceived riskiness of choice alternatives is introduced which will allow further assessment of the role of perceived risk in preference decisions. The risk function suggested here (CER, for conjoint expected risk) can predict a person's subjective risk judgments for risky choice alternatives (e.g., gambles) on the basis of a small number of easily estimated individual difference parameters. The CER function is shown to be superior to other risk measures previously suggested in its descriptive fit as well as its agreement with qualitative results regarding subjective risk judgments. A caveat against the exclusive use of two-outcome gambles in studies of judgment and decision making under risk is issued.

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