The role of demographics on adolescents’ preferences for risk, ambiguity, and prudence

Abstract

Given adolescents' propensity to engage in risky activities, experimentally elicited risk preferences have received much attention in this demographic group. In order to address the likelihood of engaging in potentially harmful activities, this study investigates various correlates of adolescents' risk preferences. Few studies have looked at other dimensions of decision-making under uncertainty in this important population, and here we attempted to close this gap by conducting a "lab in the field" experiment with adolescents. Our goals were twofold. First, we assessed both standard risk preferences during adolescence, as well as those of ambiguity and the higher order concept of prudence. Second, we examined the influence of individual characteristics of the decision-maker on attitudes towards risk, ambiguity, and prudence. In addition to gender and age, we focused on cognitive and noncognitive abilities as potential moderators of interest Our results demonstrated that adolescents are risk neutral on average, however they are also typically ambiguity averse and display prudent behavior. Also, we found that various individual factors influenced adolescents' attitudes towards risk, ambiguity, and prudence. These specific characterizations can greatly aid in targeting policy in adolescence, and we conclude by suggesting several possibilities for these interventions.

Development of ambiguity aversion from early adolescence to adulthood: New insights from the Ellsberg paradox

“…The studies discussed here support the idea that young adolescence could be the start of ambiguity aversion development (Blankenstein et al, 2016) and suggest that this tendency to prefer risky over an ambiguous option is already developing in middle adolescence, irrespective of the ambiguity level. This research underlines that ambiguity level is not enough to explain the discrepant results about ambiguity aversion development during adolescence (Fairley & Sanfey, 2020). Middle adolescents, like adults, show strong ambiguity aversion even for minimal ambiguity levels.…”

“…Significant methodological differences relative to how much probability information is available could partly explain the discrepant results. First, Tymula et al (2012), Li et al (2015), and van den Bos and Hertwig (2017) used partial ambiguity situations (e.g., a probability comprised between 40% and 60% of winning $100), whereas Fairley and Sanfey (2020) or Sutter et al (2013) exposed participants to complete ambiguity (e.g., a fully unknown probability of winning $100). Second, the design used by Li et al (2015, 2017) featured the initial definition proposed by Ellsberg (1961) (i.e., a choice between risky versus ambiguous options).…”

“…In contrast, other studies compared uncertainty aversion in the domain of risk (i.e., certain versus risky options) and the domain of ambiguity (i.e., certain versus ambiguous options). In these studies, uncertainty aversion in the domain of ambiguity is defined as a preference for a certain option over an ambiguous option, even when the two options have the same expected value or when the ambiguous option has a higher expected value (Blankenstein et al, 2016; Fairley & Sanfey, 2020; Sutter et al, 2013; Tymula et al, 2012; van den Bos & Hertwig, 2017).…”

Risk-taking and skewness-seeking behavior in a demographically diverse population

“…They find no significant differences in prudence across cultures. Heinrich and Shachat (2020) find that Chinese children and adolescents are mostly prudent, while Fairley and Sanfey (2020) have a similar finding among Dutch adolescents. The latter also find a positive correlation between IQ score and prudence.…”

“…1 While our study is novel in investigating the interaction between skewness seeking and risk taking in the general population, several studies investigate prudence and risk preference separately among the general population. 2 While prudence is the most common finding among adults (Noussair et al, 2014), adolescents (Fairley and Sanfey, 2020) and children (Heinrich 1 Apart from Bougherara et al (2021), we know of only one other study that asks this reverse question although this is not isolated in the experimental design but revealed in regression results. Specifically, Brünner et al (2011) finds that higher variance generates more skewness-seeking choices in their experiment using binary lotteries.…”