The utility of measuring and modeling perceived risk

This chapter argues that measures of subjective risk perception are important for the following three reasons: (a) perceived risk is an important dependent variable in its own right, independent from choice, and governmental and corporate risk managers and policy makers need to track public risk perception; (b) decompositions of risky choice alternatives into a risk and a return component that originated in the theory of finance may provide us with a better understanding of the psychology of risky choice, and recent work has suggested measures of risk that depart from the standard equation of risk and variance; and (c) conceptualizing risk perception as a psychological variable that can be affected by decision context or problem framing allows for a definition of risk attitude that has shown greater stability across situations than conventional operationalizations and thus might measure a stable personality trait.