Representations of Risk Judgments

Abstract

The present paper examines models that describe the judged riskiness of gambles having some probability of losing a specified amount, otherwise losing nothing. Most theories of risk judgments and risky choice assert probabilities and utilities combine multiplicatively. However, in some situations, risk judgments can be represented as an additive combination of probability and utility. Results are consistent with a change-of-process theory (Mellers, Chang, Birnbaum, and Ordóñez, 1992, Journal of Experimental Psychology: Human Perception and Performance). Factors that influence the decision strategy for combining probability and utility are examined.