Title: "Measures of perceived risk"
Authors: Jianmin Jia Chinese University of Hong Kong, James S. Dyer and John C. Butler University of Texas
Date: October 1997
Status: submitted to Management Science

Based on our previous work on the standard measure of risk, this paper presents two classes of measures for perceived risk by considering a two-dimensional structure, the mean of a lottery and its standard risk. One of the classes of our risk measures presumes that there is no risk if and only if there is no uncertainty involved and the other allows that different degenerate lotteries may be evaluated with different values of "risk". The former has more prescriptive appeal in risky decision making and the later has more descriptive power for subjective risk judgments. Our risk measures can also take into account the asymmetric effects of losses and gains on perceived risk. It is demonstrated that our risk measurement models unify a large body of empirical evidence and can be incorporated into preference models (i.e., based on risk-value tradeoffs) in a clear fashion.

Click here to access a pdf verision of the paper

Back to the Decision Analysis Working Paper Index