The Mean & Range Effect – A Sweet Spot Stimulating Risk-Seeking in Managerial Decision Support

• We report a specific irregularity in risk-a!itudes that occurs under one of the most commonrisk presentation formats. Representing the risk by the expected value and the range of possiblevalues can result in increased risk-seeking compared to other less- or more- information-richformats of risk presentation. We call this phenomenon the mean & range effect. Our researchsuggests a 20% prevalence of this phenomenon in three different countries confirmed by threedifferent modes of analysis. A novel analytical approach is suggested that defines fuzzy subsetsof the sample to allow for the partial membership of each respondent to more than one subsetto account for within-respondent variability. The results suggest the possibility to influence therisk-appetite of decision-makers by a specific risk-presentation, which can seriously affect theoutcomes of (group) decision-making problems. This finding is relevant for decision supportsystems design, marketing, corporate and consumer finance and related fields.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

mean & range effect

risk presentation

decision analysis

risk appetite

behavior

continuous distributions

Publikations- och innehållstyp

ref (ämneskategori)

art (ämneskategori)