Tadeusz Tyszka

Risk perception in Poland: A comparison with three other countries

The present study is a cross-cultural comparison of risk perception. A psychometric approach has been followed in order to examine quantitative risk judgments of different hazards and the ratings of these same hazards on various risk-characteristic scales. A list of hazards was used that is comparable with other samples (American, Hungarian, Norwegian), but a certain number of hazards of an entirely different kind were added (e.g. social tensions, shortages of consumer goods) because these are important today for Polish society. In spite of the different list of hazards, the basic factor structure of risk perception turned out to be essentially the same as the structure found in other studies. There was considerable agreement in risk perceptions in the Polish and American samples. We also discovered a number of idiosyncratic qualities of risk perception in Poland, generally indicating the importance of the availability heuristic.

Principles of Distributive Justice Experiments in Poland and America

In his famous book on a theory of justice, John Rawls argues that under some special conditions, referred to as an “original position,” people would unanimously choose as a principle of distributive justice, the principle of maximizing the welfare of the worst-off individual in the society. An experiment was conducted under conditions approximating Rawlss “veil of ignorance.” It was a replication of Frohlich, Oppenheimer, and Eavys experiment, using Polish instead of American students. In accordance with Rawlss prediction, most of experimental groups in both samples reached the consensus. However, the chosen principle was not the Rawlsian principle of maximizing the floor income, but the principle of maximizing the average income with the floor constraint. Moreover, in individual rankings and choices, the principle of maximizing the average income with a floor constraint received the highest ranks, while the Rawlsian principle received the lowest ranks. Our interpretation of these results is that the notion of distributive justice should not be reduced to considering only the welfare of the poorest.

Expert Judgments: Financial Analysts Versus Weather Forecasters

Two groups of experts, financial analysts and weather forecasters, were asked to predict corresponding events (the value of the Warsaw Stock Exchange Index and the average temperature of the next month). When accounting for inaccurate judgments, we find that weather forecasters attach more importance to probability than financial analysts. Although both groups revealed the overconfidence effect, it was significantly higher among financial analysts. These results are discussed from the perspective of learning from experience.

Perception of randomness and predicting uncertain events

Using randomly generated sequences of binary events we asked participants to make predictions about the next event. It turned out that while predicting uncertain events, people do not behave unsystematically. Our research identifies four types of relatively consistent strategies for predicting uncertain binary events: a strategy immune to short-run sequential dependencies consisting of the persistent prediction of long-run majority events, hereafter called the long-run momentum strategy; a strategy immune to short-run sequential dependencies consisting of the persistent prediction of long-run minority events, called the long-run contrarian strategy; a strategy sensitive to short-run sequential dependencies consisting of the prediction of short-run majority events, called the short-run momentum strategy; and a strategy sensitive to short-run sequential dependencies consisting of the prediction of short-run minority events, called the short-run contrarian strategy. When the character of events remains unknown, the most common strategy is the short-run momentum strategy. With the increase of a perceived randomness of the situation, people tend more often to use the short-run contrarian strategy. People differ in their general beliefs about the continuation or reversal of a trend in various natural and social processes. Trend believers, when facing sequences of binary events commonly perceived as random, tend to use momentum strategies, whereas those who believe in the trends reversal tend to use contrarian strategies.

Disposition Effect Among Contrarian and Momentum Investors

We provide evidence of disposition effect propensity for stock trading simulation participants employing a contrarian versus a momentum strategy. We found that even subjects playing with chips rather than real money remain vulnerable to those effects. Both tendencies were generally evident in our sample, but we also found individual differences. Subjects seemed to be contrarians both on position opening and on position closing. The main hypothesis of this paper states that contrarian investors are more prone to the disposition effect than are momentum traders. The model proposed by Dacey and Zielonka [2008] plays a crucial role in formulating this hypothesis. We consider the disposition effect not only in terms of the value function but also of the probability weighting function. In accordance with our hypothesis, we found that contrarian traders are more prone to the disposition effect.

Affective and Cognitive Factors Influencing Sensitivity to Probabilistic Information

In study 1 different groups of female students were randomly assigned to one of four probabilistic information formats. Five different levels of probability of a genetic disease in an unborn child were presented to participants (within-subject factor). After the presentation of the probability level, participants were requested to indicate the acceptable level of pain they would tolerate to avoid the disease (in their unborn child), their subjective evaluation of the disease risk, and their subjective evaluation of being worried by this risk. The results of study 1 confirmed the hypothesis that an experience-based probability format decreases the subjective sense of worry about the disease, thus, presumably, weakening the tendency to overrate the probability of rare events. Study 2 showed that for the emotionally laden stimuli, the experience-based probability format resulted in higher sensitivity to probability variations than other formats of probabilistic information. These advantages of the experience-based probability format are interpreted in terms of two systems of information processing: the rational deliberative versus the affective experiential and the principle of stimulus-response compatibility.

Perception and judgments of the economic system

Abstract Two basic questions are addressed in the present research. The first question concerns how various economic concepts go together in ordinary peoples minds. The second question concerns preference structure, i.e. opinions on an ideal socioeconomic system held by Poles under the current system transformation. A characteristic feature of the cognitive structure discovered is that people group issues which are experienced together, and not necessarily those which are logically or economically related. As far as preferences of Poles in the socioeconomic area are concerned, society is ‘sensitive’ to the goals and values of the welfare state. The pro-market transformation of the national economy has only moderate support. Cluster analysis reveals five different profiles of socioeconomic preferences. They are interpretable in terms of an attitude toward market economy. The greatest number of differences as to the preferred shape of economic life are associated with education and the least with income. Inconsistency between generally declared attitudes and preferred specific solutions is also found, and is accounted for in terms of different mechanisms which underlie general and more specific preferences.

How do people perceive economic activities

Abstract The focus of this paper is on the categories used by ordinary people to perceive and evaluate different economic activities, such as: running a business, opening a shop, buying a product, consuming energy, etc. Two different tasks were used: the rating of activities according to scales, and similarity sorting. Factor analysis of the rating data revealed that the eleven scales used are reducible to three factors. This three-factor solution was virtually the same for different occupational groups. Thus, this cognitive representation of economic activities appeared universal across occupations. However, multidimensional scaling analysis of the similarity sorting data yielded three dimensions which were quite different from the factors discovered using the rating data. Thus, the cognitive representation of economic activity appeared to vary according to the method used to elicit this representation. This last finding was not surprising in the light of the known variability of human judgments given response mode, framing, and context.

What verbal reports say about risk perception

Abstract The main purpose of this study is to investigate the question of whether various tasks give rise to different representations of risks, as reported by Johnson and Tversky (1984). It was found that proximities between risks based on similarity judgements are easily interpretable in terms of a tree representation. The resulting clusters are mostly composed of homogeneous risks. They differed from clusters based on absolute judgements, which are composed of risks of a more diverse character. The results of a multidimensional scaling analysis of absolute judgement data are easily interpretable in terms of three abstract dimensions: size of a potential catastrophe, familiarity, and probability, whereas for comparative judgement data one of the two dimensions found was concerned with the nature of the risk rather than with abstract risk characteristics. Finally, we found that verbal protocols of both similarity and absolute judgemental tasks yield the same risk characteristics as used in the psychometric paradigm. The only difference between the two tasks is that in the similarity sorting tasks almost twice as many statements as in the Q-sorting task are related to the nature of the hazardous event. This supports the claim by Slovic et al. (1984, 1985) that similarity judgements are influenced by considerations irrelevant to risk perception.

Are People Interested in Probabilities of Natural Disasters

Previous research has demonstrated that in naturalistic risky decisions people tend to have little interest in receiving information about probabilities. The present research asked whether subjects search for and employ probabilistic information in situations that are representative of natural disasters: namely, situations where (1) they have no control over the occurrence of a negative event and (2) there might be huge losses of physical and human capital. Pseudo-realistic scenarios involving risky situations were presented to 116 experimental participants. Based on the active information search paradigm, subjects were given only a basic description of the situation and had to acquire additional information from the experimenter. In addition to the main task, the individual risk aversion of participants was measured. We demonstrate that in pseudo-naturalistic scenarios involving natural disasters people tend to show more interest in probabilities compared to scenarios with generally more controllable risks. Moreover, this interest increases with an increase in the importance of the situation to the decisionmaker. The importance of the situation also has a positive influence on the thoroughness of information search. The experiment detected no connection between individual risk aversion and information search.