Risky Decisions

Abstract

Decision behavior in realistic risky scenarios is quite different from that in gambles: Decision makers in the former are less interested in probability information than they are in the latter. Instead, they often attempt to actively manipulate the risk in an otherwise attractive alternative using a risk-defusing operator (RDO). An RDO is an action intended by the decision maker to be performed in addition to the risky but otherwise attractive alternative, and it is expected to decrease the risk (e.g., vaccination, insurance). The search for an RDO and the incorporation of a detected RDO into the alternative cannot be modeled with classical decision theories or heuristics. In this article I present risk-management-decision theory, which describes the decision process with and without RDOs, and give an overview about experimental research with RDOs. I discuss the consequences of the RDO concept for theories of decision behavior.