Does risk attitude depend on whether risk is predetermined

Abstract

We identify experimentally a decision-making phenomenon pertaining to pre-decision determination of uncertainty to be revealed after choice. Consequentially speaking, as long as the uncertainty resolution associated with a lottery is revealed only after choice, it should not matter whether this uncertainty is predetermined. We find that the pre-decision determination of risk has an impact on risk attitude. Specifically, subjects are less risk-averse under predetermined risk than under future-determined risk where uncertainty is resolved and revealed after decision-making. Based on the ideas of uncertainty perception and source preference, we offer a brief discussion on possible accounts for the non-neutrality towards predetermined uncertainty.