Risk Preferences and Aging: The 'Certainty Effect' in Older Adults’ Decision Making

Abstract

A prevalent stereotype is that people become less risk taking and more cautious as they get older. However, in laboratory studies, findings are mixed and often reveal no age differences. In the current series of experiments, we examined whether age differences in risk seeking are more likely to emerge when choices include a certain option (a sure gain or a sure loss). In four experiments, we found that age differences in risk preferences only emerged when participants were offered a choice between a risky and a certain gamble but not when offered two risky gambles. In particular, Experiments 1 and 2 included only gambles about potential gains. Here, compared with younger adults, older adults preferred a certain gain over a chance to win a larger gain and thus, exhibited more risk aversion in the domain of gains. But in Experiments 3 and 4, when offered the chance to take a small sure loss rather than risking a larger loss, older adults generally exhibited more risk seeking in the domain of losses than younger adults. In a nutshell, our findings suggest that older adults weigh certainty more heavily than younger adults.

Keywords: Certainty Effect, Risk Seeking, Risk Aversion, Older Adults, Young Adults, Emotions, Affect