The influence of individual differences and decision domain in the consistency of risk preferences

The research presented in this thesis considers the question of whether individual-level risk preferences are consistent or inconsistent across decision domains. For example, do people make the same decisions with respect to work, health and finance? Some previous authors have suggested that risk preferences are inconsistent, e. g. Kahneman and Tversky (1979), while others have put forward the idea that people have generalised tendencies to take or avoid risks, e. g. Sitkin and Pablo (1992). The work of Sitkin and Pablo was drawn upon to develop hypotheses concerning the conceptualisation and construction of risk propensity. Risk propensity was operationalised as the degree of consistency of cross-domain risk preferences. It was proposed that a propensity to take or avoid risks is associated with whether individuals have consistent tendencies across different decision domains, that personality will be a key predictor of risk propensity, and that inconsistent cross-domain risk preferences will be associated with risk domain-specific cognitive and emotional aspects of decision making. A survey measure was developed to assess risk and decision preferences both across and within the domains of work, health and finance. Biographical and personality factors were also measured. The sample comprised 360 participants drawn from five sample groups chosen to capture a range of risk preferences. The results showed that risk propensity can be conceptualised and measured in terms of the consistency of cross-domain risk preferences. People who were consistent in their risk preferences were characterised by the personality traits of emotional stability, low extroversion, low openness and high agreeableness. Additionally, consistent risk preferences were associated with relative consistency of attention to situational information and perceived risk. The majority of participants, however, had different risk preferences in different domains, and showed variability in their decision preferences. The implications of the research for understanding risk propensity and risk management are discussed.