And individuals find small chances of large payoffs quite attractive, as if magnifying the probabilities of larger outcomes. Image: Shutterstock

How do individuals make decisions in situations involving risk? How do we instinctually trade off the potential for a gain with the potential for loss?

Most individuals fear losses more than they like gain — we are loss averse — and the choice of reference point shifts our perception of gains and losses.

And individuals find small chances of large payoffs quite attractive, as if magnifying the probabilities of larger outcomes.

[This article has been reproduced with permission from University Of Virginia's Darden School Of Business. This piece originally appeared on Darden Ideas to Action.]

QOSHE - Understanding decision-making: Inherent risk preferences - Darden School Of Business
menu_open
Columnists Actual . Favourites . Archive
We use cookies to provide some features and experiences in QOSHE

More information  .  Close
Aa Aa Aa
- A +

Understanding decision-making: Inherent risk preferences

8 1
06.02.2024

And individuals find small chances of large payoffs quite attractive, as if magnifying the probabilities of larger outcomes. Image: Shutterstock

How do individuals make decisions in........

© Forbes India

Get it on Google Play