Attribute tradeoffs in low probability/high consequence risks: the joint effects of dimension preference and vagueness

AbstractA number of studies have shownthat people are typically averse to vagueness inprobabilities. But formanyimportant decisions, peoplerarely have access to precisevalues for either outcomes or probabilities. It has been demonstrated that mostpeople held congruent attitudes towards vagueness for both probabilities andoutcomes, but dimension preference was typically a better determinant of choicethan vagueness attitudes. The present study investigates vagueness effects on therelative weighting ofrisk dimensions for a particularly problematic type of hazard-risks with very small probabilities and severe consequences - using a morereliableand robust measurement procedure. Eighty-seven subjects evaluated hypotheticalhealth risk options whichvaried interms ofthe probability of loss, amountof loss,and the precision with which each dimension was specified. Relevant individualattitudes towardsvagueness and dimensionpreferenceweresignificant predictorsofchoice, and a new indication of an association between dimension salience andvagueness attitude was found: most subjects were more concerned with loss thanprobabilities, and were moreaverse to vagueness in losses as well.1. IntroductionA number of empirical studies (e.g., Ellsberg,

[1]  Kristine M. Kuhn,et al.  The Relative Importance of Probabilities, Outcomes, and Vagueness in Hazard Risk Decisions , 1996 .

[2]  C. González-Vallejo,et al.  Effects of vague probabilities and of vague payoffs on preference: a model comparison analysis , 1996 .

[3]  P. Slovic,et al.  Presenting uncertainty in health risk assessment: initial studies of its effects on risk perception and trust. , 1995, Risk analysis : an official publication of the Society for Risk Analysis.

[4]  Howard Kunreuther,et al.  Ambiguity and underwriter decision processes , 1995 .

[5]  Eric R. Stone,et al.  Risk communication: absolute versus relative expressions of low-probability risks , 1994 .

[6]  D. Budescu.  Dominance analysis: A new approach to the problem of relative importance of predictors in multiple regression. , 1993 .

[7]  Colin Camerer,et al.  Recent developments in modeling preferences: Uncertainty and ambiguity , 1992 .

[8]  Paul J. H. Schoemaker,et al.  Choices involving uncertain probabilities: Tests of generalized utility models , 1991 .

[9]  John T. Scholz,et al.  Boundary effects of vague risk information on taxpayer decisions , 1991 .

[10]  Colin Camerer,et al.  Experimental markets for insurance , 1989 .

[11]  D. Halpern,et al.  Using statistical risk information to assess oral contraceptive safety , 1989 .

[12]  P. Schoemaker.  Preferences for information on probabilities versus prizes: The role of risk-taking attitudes , 1989 .

[13]  Howard Kunreuther,et al.  Risk, ambiguity, and insurance , 1989 .

[14]  C S Konheim.  Risk communication in the real world. , 1988, Risk analysis : an official publication of the Society for Risk Analysis.

[15]  A. Tversky,et al.  Contingent weighting in judgment and choice , 1988 .

[16]  David V. Budescu,et al.  Decisions based on numerically and verbally expressed uncertainties. , 1988 .

[17]  R. Hogarth,et al.  Ambiguity and Uncertainty in Probabilistic Inference. , 1985 .

[18]  Shawn P. Curley,et al.  The center and range of the probability interval as factors affecting ambiguity preferences , 1985 .

[19]  A. Tversky,et al.  Prospect Theory : An Analysis of Decision under Risk Author ( s ) : , 2007 .

[20]  John W. Payne,et al.  Alternative approaches to decision making under risk: Moments versus risk dimensions. , 1973 .

[21]  P. Slovic,et al.  Relative importance of probabilities and payoffs in risk taking , 1968 .

[22]  S. Becker,et al.  What Price Ambiguity? or the Role of Ambiguity in Decision-Making , 1964, Journal of Political Economy.

[23]  W. Fellner.  Distortion of Subjective Probabilities as a Reaction to Uncertainty , 1961 .

[24]  D. Ellsberg.  Decision, probability, and utility: Risk, ambiguity, and the Savage axioms , 1961 .