Decision-Making Under Risk

TLDR

Decision‑making under risk has been studied across disciplines, yet interdisciplinary integration is lacking, classic theories have not been updated with empirical data, and evolutionary perspectives remain largely ignored. This review critically examines four influential decision‑making theories—expected utility, prospect, risk‑sensitivity, and heuristic approaches—emphasizing risk‑sensitivity theory and proposing steps to integrate diverse perspectives. The authors review robust empirical evidence on individual differences and situational factors that predict risky decision‑making, underscoring the need for any general theory to incorporate these determinants.

Abstract

Decision-making under risk has been variably characterized and examined in many different disciplines. However, interdisciplinary integration has not been forthcoming. Classic theories of decision-making have not been amply revised in light of greater empirical data on actual patterns of decision-making behavior. Furthermore, the meta-theoretical framework of evolution by natural selection has been largely ignored in theories of decision-making under risk in the human behavioral sciences. In this review, I critically examine four of the most influential theories of decision-making from economics, psychology, and biology: expected utility theory, prospect theory, risk-sensitivity theory, and heuristic approaches. I focus especially on risk-sensitivity theory, which offers a framework for understanding decision-making under risk that explicitly involves evolutionary considerations. I also review robust empirical evidence for individual differences and environmental/situational factors that predict actual risky decision-making that any general theory must account for. Finally, I offer steps toward integrating various theoretical perspectives and empirical findings on risky decision-making.