WHY PEOPLE TAKE ECONOMIC RISKS: VIEWS FROM PERSONALITY THEORY
Zaleskiewicz, T., Wroclaw University of Technology, Poland
Traditional economic theories assume that people choose risky options if they maximize expected utility. However, results of many psychological studies have indicated that people differ in how they make financial decisions under uncertainty and what reasons motivate them to take economic risks. This paper introduces two kinds of risk taking: instrumental risk taking and stimulating risk taking and reports their empirical examination in two studies. The conception of the dual nature of economic risk assumes that risky behavior, both in economic and social domains, can be motivated by needs which are different from maximizing expected utility. It is assumed that stimulating risk takers focus on the search for excitement or emotional arousal, and instrumental risk takers concentrate on reaching a future goal (e.g. financial profit).The main purpose of the two studies was to test associations between both risk taking tendencies and some personality features. It was found that instrumental risk taking was related to risk preference in the investment domain and was determined by personality traits connected with orientation toward the future, the tendency to think rationally, functional impulsivity and lower level of sensation seeking. On the contrary, stimulating risk taking was found to be related to the preference for recreational, ethical, health and gambling risks and was associated with personality features connected with paratelic orientation, arousal seeking, dysfunctional impulsivity and strong sensation seeking.