Stated vs. revealed preferences?

How can we best measure risk-taking? Find out more from Dr Renato Frey.

Risk preference constitutes a key construct in the behavioral sciences, and in some applied settings (e.g., finance) the assessment of people’s risk preference is even required by law.

But how best to do so? Different sub-disciplines in psychology and economics have employed various approaches to this end: Some rely on self-report measures to tap "stated preferences", whereas others rely on behavioural tasks to elicit "revealed preferences".

In this talk Dr Frey will first review evidence from a comprehensive empirical investigation of the psychometric structure of the construct of risk preference and its measurement, which highlighted that different types of measures diverge quite strongly in terms of various psychometric properties.

In the second part of the talk, he will provide possible explanations for this observation, by i) unpacking people’s representations of their risk preferences and modelling the cognitive information-integration processes underlying their self-reports, and ii) examining the role of “representative design” in one of the state-of-the-art behavioural measures of risk taking. He will conclude with some thoughts on how to advance the measurement of risk taking in the future.