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Whether you’re aware of it or not, the decisions you make every day carry risk.

Risks in a decision-making context refer to the uncertain consequences of a decision.

People can be either risk-seeking (i.e., prefer options with uncertain outcomes) or risk-averse (i.e., prefer options with certain outcomes).

Previous research has shown that people often make more risky decisions for themselves than when they are making decisions for others.

“Although research has indicated that people are more risk-averse when making decisions for themselves than for others, my colleague and I wanted to investigate whether this tendency still holds in situations where risk is shared between two people. That’s right,” Associate Professor Tsai Ming-hong told the Office of Research.

“An example of risk allocation can be seen in the allocation of compensation. If a supervisor decides that compensation should have an element of risk, Or restricted stocks will be included as part of the total compensation package. However, if the supervisor decides to go for a risk-free compensation package, the entire compensation package will be entirely cash-based,” he continued.

Previous research has also found that people exhibit different levels of risk preferences based on whether they perceive the outcome of a decision as a gain or a loss.

What are these results consistent with? Prospect theory suggests.

Prospect theory states that when people are faced with a risky choice that leads to gain, they tend to be risk averse. For example, when given a choice between receiving $1,000 with certainty or a 50 percent chance of receiving $2,000, most people choose the $1,000 option.

However, when people are faced with a risky choice that results in losses, they become risk-seekers—which explains why after losing a lot of money at the casino Also, people are very tempted to take big gambles to compensate for losses.

That said, the effects of profit-loss domains on risk allocation between two people have not been studied.

Another aspect that has not been studied is influence. Social value orientation (Then).

SVO is a concept that describes and classifies people according to their personal attitudes towards the allocation of resources.

Social people pursue equitable distribution between themselves and others and the best common outcome, while professional people seek to maximize their personal benefits.

Thus, when it comes to risk allocation it is likely that social people will allocate Equal between self and others. In contrast, narcissistic people are more likely to avoid potential losses and allocate risks to gain gains.


The research project, along with three experimental studies, was led by Tsai, an associate professor in the Department of Psychology at North Dakota State University, and her colleague, Verlin B. Heinz, professor.

Research investigators selected adult samples for all studies to simulate risk attribution in real-world situations.

Research participants were recruited from Cloud Research (formerly known as TurkPrime). Cloud Research is one. Researchers post studies and crowdsource participants for a small fee.

A total of 1,124 participants were recruited from the United States. They were given a small incentive to participate in the study.

All studies were conducted entirely online using the Qualtrics survey tool.


The results of three experiments showed that participants shared risks equally between themselves and the other party, rather than sharing the risk unequally.

Studies also show that social people allocate risks equally regardless of whether they are faced with a risky choice, which results in gain or loss.

In contrast, pro-self people allocate less risk to themselves when faced with a risky choice involving gain versus loss.

Research implications

Professor Tsai and Hinz’s research offers new real-world implications for risk preference, suggesting that prosocial people prefer moderate-risk options for themselves and others.

In contrast, previous research has suggested that people make risky decisions for others more than for themselves. For example, people may encourage another person to buy risky stocks or engage in blind dates because they may be reluctant to engage in these risky activities themselves.

There is study published In the journal Thinking and reasoning.

More information:
Ming-Hong Tsai et al., Gain-Loss Domain and Social Value Orientation as Determinants of Risk Allocation Decisions, Thinking and reasoning (2023). DOI: 10.1080/13546783.2023.2259543

Reference: How do people allocate risks between themselves and others? (2024, February 23) Retrieved February 23, 2024 from https://phys.org/news/2024-02-people-allocate.html

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