Determinants of Economic Risk Preferences Across Adolescence

Abstract

This study examined economic risk preferences using a multidimensional approach in adolescents and young adults (N = 444, ages 13–27). Despite the two major theoretical approaches in adolescent economic risk-taking—socioemotional theories and fuzzy-trace theory—comparatively little is known about the role of incidental affective factors in economic risk-taking. We tested six demographic and psychological determinants (age, gender, positive/negative affect, state anxiety, and indecision) on two economic risk decision tasks (loss aversion and skewness). Adolescents reported higher positive affect and lower negative affect than adults, but anxiety and indecision were age-invariant. Women showed lower positive affect and higher negative affect, state anxiety, and indecision compared to men. We found women to be more loss-averse; all other factors were not related to loss aversion. Adolescents were equally likely to accept symmetric and skewed gambles, whereas adults had more nuanced preferences. Adolescents also demonstrated a reduced bias toward negatively skewed risks compared to young adults, but both groups showed similar preferences for positively skewed and symmetric risks. These results support fuzzy-trace theory's prediction of age-related shifts from verbatim to gist representations: More verbatim processing during adolescence facilitated risk-taking in negatively skewed risks, diverging from prospect theory. Positive affect shifted risk preference for adolescents and young adults in divergent directions—adolescents favored symmetrical risks more, while adults favored negatively skewed risks more. These patterns illustrate that adolescents and young adults in positive moods demonstrate risk preferences that are rare for their developmental stage, with potentially detrimental consequences depending on the choice at hand.