Risk adaptation and emotion differentiation: An experimental study of dynamic decision-making

Yan Li () and Neal M. Ashkanasy ()
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Yan Li: Beijing Institute of Technology
Neal M. Ashkanasy: University of Queensland

Asia Pacific Journal of Management, 2019, vol. 36, issue 1, No 10, 219-243

Abstract: Abstract We report a study of risky decision-making in a dynamic risk environment, looking in particular at idea that variations in risk preferences over time are subject to both risk adaptation and ability to differentiate negative emotions. In a between-group experiment, 175 participants completed 20 binary project investment decisions under three objective probabilities of success conditions (20%, 50%, and 80%). The results showed that participants’ risk-taking increased at Time 2 only when risky projects have a medium-to-high chance of success (50% or 80%) at Time 1. We also found that participants who could differentiate their negative emotions under the condition with high favorability of risk-taking (80%), achieved higher returns, suggesting that negative emotion differentiation provides emotional information to capture the pattern of decision trials in the environment more favorable to risk-taking success. We conclude with a discussion of the theoretical and practical contributions of our findings for individuals and firms.

Keywords: Risk adaptation; Decision-making; Risk taking; Emotion differentiation; Australia (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10490-017-9559-3

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