The role of individual characteristics in a complex and risky decision task

Abstract

Different economic decisions among agents can be related to their different degree of risk aversion and carry a great weight in business strategies. The set of decisions taken by the business manager mutually affects each other while these are affected by risk. All business decisions are not equally affected and at the same time, by the manager´s risk attitude. The shape of the probability weighting function proposed by D. Kahnemann and A. Tversky in their Prospect Theory (1979) has different increasing marginal returns in different regions. Persons with different risk aversion have different sensitivities to changes in risk. Our results show that the variance of managers´ decisions across time is positively correlated with their risk aversion sensibility. There is a clear difference in the economic behavior patterns of managers´ with a different risk aversion sensibility.