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Methods for elicitation of risk preferences and perceptions: An examination of individual and group risk preferences
Published
Author(s)
Rithika Dulam, Christina Gore, Jennifer Helgeson
Abstract
Risk fundamentally influences strategic planning, investment management, and policy formulation across businesses, governments, and communities. Accurately measuring risk preferences and perceptions at both individual and community levels is indispensable for informed decision-making, particularly in community resilience planning. This NIST Special Publication explores the definition of risk, its application and importance in the community resilience domain and disentangles relative aspects of risk, including risk behavior, risk preference, risk perception, and risk attitude. We delve into how risk preferences and risk perceptions influence decision-making and outline various methods for eliciting associated values. These methods include but are not limited to incentivized games and data collection instruments, highlighting the different techniques used to gauge how individuals perceive risks. We report on various methods to measure and aggregate risk preferences within groups. Current methods are insufficient in deriving accurate group risk preferences from individual data and fail to fully address the complexities of group interactions. Addressing this gap requires the development of more refined and robust methods to ensure accurate representation of group risk preferences, thereby enhancing community resilience strategies. This NIST Special Publication underscores the critical role of risk preference elicitation, highlights challenges in aggregating individual preferences to the group level, and advocates for improved aggregation methods to support resilient community planning.
Dulam, R.
, Gore, C.
and Helgeson, J.
(2024),
Methods for elicitation of risk preferences and perceptions: An examination of individual and group risk preferences, Special Publication (NIST SP), National Institute of Standards and Technology, Gaithersburg, MD, [online], https://doi.org/10.6028/NIST.SP.1323, https://tsapps.nist.gov/publication/get_pdf.cfm?pub_id=958487
(Accessed October 8, 2024)