Methods for elicitation of risk preferences and perceptions: An examination of individual and group risk preferences

Published

September 12, 2024

Author(s)

Rithika Dulam, Christina Gore, Jennifer Helgeson

Abstract

Risk fundamentally influences strategic planning, investment management, and policy formulation across businesses, governments, and communities. Accurately measuring risk preferences and perceptions at both individual and community levels is indispensable for informed decision-making, particularly in community resilience planning. This NIST Special Publication explores the definition of risk, its application and importance in the community resilience domain and disentangles relative aspects of risk, including risk behavior, risk preference, risk perception, and risk attitude. We delve into how risk preferences and risk perceptions influence decision-making and outline various methods for eliciting associated values. These methods include but are not limited to incentivized games and data collection instruments, highlighting the different techniques used to gauge how individuals perceive risks. We report on various methods to measure and aggregate risk preferences within groups. Current methods are insufficient in deriving accurate group risk preferences from individual data and fail to fully address the complexities of group interactions. Addressing this gap requires the development of more refined and robust methods to ensure accurate representation of group risk preferences, thereby enhancing community resilience strategies. This NIST Special Publication underscores the critical role of risk preference elicitation, highlights challenges in aggregating individual preferences to the group level, and advocates for improved aggregation methods to support resilient community planning.

Citation

Special Publication (NIST SP) - 1323

Report Number

1323

NIST Pub Series

Special Publication (NIST SP)

Pub Type

NIST Pubs

Download Paper

https://doi.org/10.6028/NIST.SP.1323

Local Download

Keywords

Community resilience planning, Measuring risk, Risk perception, Risk preference

Citation

Dulam, R. , Gore, C. and Helgeson, J. (2024), Methods for elicitation of risk preferences and perceptions: An examination of individual and group risk preferences, Special Publication (NIST SP), National Institute of Standards and Technology, Gaithersburg, MD, [online], https://doi.org/10.6028/NIST.SP.1323, https://tsapps.nist.gov/publication/get_pdf.cfm?pub_id=958487 (Accessed November 20, 2024)