Evaluating Lotteries, Risks, and Risk-mitigation Programs

Abstract

Two experiments were designed to explore the existence of systematic differences in risk perceptions and risk attitudes between Chinese and U.S. participants. The first experiment involved ranking monetary lotteries using measures of perceived riskiness and WTP. Several simple heuristics were evaluated to predict perceived riskiness and WTP. Using WTP responses, cumulative prospect theory functions were determined for participants from both countries. Compared to their U.S. counterparts, Chinese participants are found to be less risk averse and to have higher within group agreement for each task. The second experiment involved ranking real-world risks and associated risk-mitigation programs using measures of concern and preference, respectively. Conjoint analysis reveals additional cultural differences in the perception and evaluation of multi-attribute risks and risk-mitigation programs. The cross-cultural versus cross-task variation are discussed.