RISK-PREFERENCE IN COIN-TOSS GAMES

It is hypothesized that an individual has a preferred unidimensional risk level in a coin-tossing game, and that his preferences are single-peaked over the risk scale. Risk was varied by increasing both the monetary denomination (D = 1¢ to $1) and number of tosses (N = 1 to 20) involved in a game. The rank order preference data of 30 subjects within sets of games having either constant D or N, single stimulus preference data, and pair comparison preferences between games supported these hypotheses. Data also supported the existence of a function R0[(D,N)] which maps games onto the risk scale and is monotone increasing in both arguments. However, the exact form of the function may vary, depending on the particular set of games from which the subject chooses. © 1969.