Risk: Empirical Studies on Decision and Choice

Risk is a concept that defies precise definition. Some uncertainty about the outcome of a decision or action seems to be necessary to make it appear risky. This article describes three paradigms that define risk in different ways and that identify different types of variables that have been shown to affect people's perception of risk. Studies within the axiomatic measurement paradigm have focused on the way people combine objective risk information, that is, possible consequences of risky choice options such as mortality rates or financial losses and their likelihood of occurrence. Research within the psychometric paradigm has identified people's emotional reactions to risky situations that affect judgments of the riskiness of physical, environmental, and material risks in ways that go beyond their objective consequences. Studies within the sociocultural paradigm have examined the effect of group- and culture-level variables on risk perception. Risk is also a latent variable in theories of risk preference, for example, in risk-value models of risky choice. Empirical studies of risk perception within the three paradigms and across a range of content domains show that risk perceptions are shaped by three classes of variables: possible decision outcomes and their likelihood; affective reactions such as dread or fear of the unknown; and social and cultural variables that influence perception and interpretation of the consequences of risky choice options.