Three Papers on Risk and Personality Open Access

Jiang, Bing (2013)

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Experimental studies of choice under risk show that there exists a large amount of heterogeneity in how people perceive risk. Despite of this, little effort has been made to identify the source of such heterogeneity. This study explores the possibility that the distinguishing personality profile of the decision-maker is linked to heterogeneity in risk preference. Using data from incentivized choice experiments combined with validated psychological questionnaires, I establish three interesting results. First, people can be clustered into distinct personality types and different types may have different risk preferences: the motivated view gambling more attractive, whereas the impulsive are the most capable of discriminating non-extreme probabilities. Second, individuals who score higher on future goal-orientation & fun-seeking trait are less risk seeking and more patient, while reward-driven individuals are less patient. Third, there also exists a correlation between personality and entrepreneurship: entrepreneurs are shown to be significantly more motivated than non-entrepreneurs. In addition, the trait of motivation is positively associated with one's probability of becoming an entrepreneur, whereas the trait of reward-driven is negatively related to such probability. These results suggest that the observed heterogeneity in risk preference may be explained by personality profiles, which can be elicited though standard psychological questionnaires. I believe these findings have important implications for understanding decision-making under risk, as well as informing economic theories and government policies.

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