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Asia Pacific Journal of Management

, Volume 36, Issue 1, pp 219–243 | Cite as

Risk adaptation and emotion differentiation: An experimental study of dynamic decision-making

  • Yan LiEmail author
  • Neal M. Ashkanasy
Article
  • 301 Downloads

Abstract

We report a study of risky decision-making in a dynamic risk environment, looking in particular at idea that variations in risk preferences over time are subject to both risk adaptation and ability to differentiate negative emotions. In a between-group experiment, 175 participants completed 20 binary project investment decisions under three objective probabilities of success conditions (20%, 50%, and 80%). The results showed that participants’ risk-taking increased at Time 2 only when risky projects have a medium-to-high chance of success (50% or 80%) at Time 1. We also found that participants who could differentiate their negative emotions under the condition with high favorability of risk-taking (80%), achieved higher returns, suggesting that negative emotion differentiation provides emotional information to capture the pattern of decision trials in the environment more favorable to risk-taking success. We conclude with a discussion of the theoretical and practical contributions of our findings for individuals and firms.

Keywords

Risk adaptation Decision-making Risk taking Emotion differentiation Australia 

Notes

Funding

This research is supported by Chinese Nature Science Fund (No.71371029).

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Authors and Affiliations

  1. 1.School of Management and EconomicsBeijing Institute of TechnologyBeijingPeople’s Republic of China
  2. 2.University of QueenslandBrisbaneAustralia

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