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The Mean & Range Effect – A Sweet Spot Stimulating Risk-Seeking in Managerial Decision Support
LUT University, School of Business and Management, Finland; Palacký University Olomouc, Czech Republic.
LUT University, School of Business and Management, Finland.ORCID iD: 0000-0002-7402-0421
Palacký University Olomouc, Czech Republic.
LUT University, School of Business and Management, Finland.
2020 (English)In: The Nordic Journal of Business, ISSN 2342-9003, E-ISSN 2342-9011, Vol. 69, no 1, p. 21-43Article in journal (Refereed) Published
Abstract [en]

We report a specific irregularity in risk-a!itudes that occurs under one of the most commonrisk presentation formats. Representing the risk by the expected value and the range of possiblevalues can result in increased risk-seeking compared to other less- or more- information-richformats of risk presentation. We call this phenomenon the mean & range effect. Our researchsuggests a 20% prevalence of this phenomenon in three different countries confirmed by threedifferent modes of analysis. A novel analytical approach is suggested that defines fuzzy subsetsof the sample to allow for the partial membership of each respondent to more than one subsetto account for within-respondent variability. The results suggest the possibility to influence therisk-appetite of decision-makers by a specific risk-presentation, which can seriously affect theoutcomes of (group) decision-making problems. This finding is relevant for decision supportsystems design, marketing, corporate and consumer finance and related fields.

Place, publisher, year, edition, pages
Association of Business Schools , 2020. Vol. 69, no 1, p. 21-43
Keywords [en]
mean & range effect, risk presentation, decision analysis, risk appetite, behavior, continuous distributions
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-62607OAI: oai:DiVA.org:hj-62607DiVA, id: diva2:1802578
Available from: 2023-10-05 Created: 2023-10-05 Last updated: 2023-10-05Bibliographically approved

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Morreale, Azzurra

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