Thomas Dohmen, Simone Quercia, Jana Willrodt

We show that the disposition to focus on favorable or unfavorable outcomes of risky situations affects willingness to take risk as measured by the general risk question. We demonstrate that this disposition, which we call risk conception, is strongly associated with optimism, a stable facet of personality and that it predicts real-life risk taking. The general risk question captures this disposition alongside pure risk preference. This enlightens why the general risk question is a better predictor of behavior under risk across different domains than measures of pure risk preference. Our results also rationalize why risk taking is related to optimism.

JEL Codes
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
C91: Design of Experiments: Laboratory; Individual
D81: Criteria for Decision-Making under Risk and Uncertainty
D01: Microeconomic Behavior: Underlying Principles