Risk Preferences

Risk Preferences Risk preferences may influence choices. A risk seeker prefers more variability. Someone who gambles in a casino must be risk seeking because the expected payoff from a dollar bet will always be less than a dollar because of taxes and the casino’s take. Likewise, a patient who can expect to live 18 months if she undergoes standard therapy may be a risk seeker. She may prefer a therapy that gives her an expected life span of only 13 months if it increases her chances of significant recovery. The manager of a nearly bankrupt business is likely also a risk seeker. Taking chances, even ones with low expected payoffs, may be the only way to survive.