An individual’s level of self-control can affect how he or she weights risk consequences and risk probabilities and the degree to which each of these components predicts and influences his or her overall perception of risk. Lower (higher) self-control tends to be associated with a greater (smaller) weight on the probability of a risky outcome over the consequences of what such an outcome could bring.

Failures of self-control in the face of risky choices impose costs on individuals and on society. The ways that reduced self-control can skew peoples’ construction of risk have received scant attention. Individuals with lower levels of self-control tend to weight probability over consequences in their perception of risk. Lower self-control is associated with weighting the probabilities of risks higher and their consequences less severe. These results are stronger when self-control over risk is high and weaker when it is not.

The authors use regression models to test their hypothesis in a series of six experiments with numerous subjects and different enticements to participate. Although the conclusions differ based on the inclusion of certain limitations in the experiments, for the most part, the authors’ findings support the different weighting of probability versus consequences among individuals who exhibit low versus high self-control.

Risk officers, traders, portfolio managers, students of behavioral finance, and policymakers would do well to consider the authors’ conclusions because making decisions in the face of risk lies at the heart of their work. Such a thoughtful appraisal of the drivers of risk perception could have benefited these individuals during the recent financial crisis and recession.

The authors consider the body of literature on self-control and risky behavior to build and carry out a series of experiments to illustrate how distorted risk construction takes place across risk domains varying in terms of the subject’s level of self-control. An introductory discussion outlines the development of a model of perceived risk. Each experiment includes a discussion of its purpose and methodology and a discussion of the results.

Each trial applies a variation of a regression analysis that tests how much a change in risk-component weights of probability and consequences alters the subject’s overall perception of risk (e.g., how much a 1 percentage point change in either affects the individual’s overall risk perception). The experiments involve offers to a pool of individuals to participate in a study in exchange for a gift or the chance of a gift. The metrics vary by experiment, and various controls are applied to determine whether self-control changes how subjective evaluations of probability and consequence predict and inform general concepts of perceived risk.

The first experiment tests respondents’ reaction to risk perception measures across low and high self-control risk domains by having them rank their subjective perceptions of risk consequences. The exercise demonstrates that self-control is required to measure the varying weights of probability and consequences in risk construction motivated by differences in self-control.

The second experiment modifies the first by manipulating self-control to test how it affects the causal role of the differential weighting of risk components and to eliminate possible effects of other variables. The third focuses on risks with less severe outcomes, using the same procedure and analysis as the first but for high self-control risks with less severe outcomes. The authors confirm that any weighting bias holds for only major and threatening risks.

The fourth experiment has two parts. In the first, participants complete a 13-item self-control measure (also used in the third experiment). Then, they read scenarios of risks that involve both a high and a low level of self-control. For each, they are presented with and asked to choose between a risk-reducing measure that would decrease the probability of a risk and one that would reduce the negative consequences of the risk. The outcome appears to confirm that a different weighting may predict both the preference for and choice of a risk-reducing product and change in lifestyle. The second part extends the process to consider the results in the presence of positive risks with similar results.

In the fifth experiment, the authors test for the presence of temporal discounting—namely, whether individuals with low self-control discount or defer the potential consequences of their actions far into the future. In general, the results confirm the likelihood that individuals who exercise less self-control tend to place more importance on the probability that a risk might take place in the present rather than what the consequences of a risky action in the future could be. The final experiment tests the authors’ hypotheses in the context of monetary gambles, exposing participants with varying degrees of self-control to low- and high-payoff options to gauge their degree of risk aversion and focus on winning the bet versus the monetary outcome. A lower behavioral self-control score does not correlate with differential risk-weighting preferences.

An understanding of how individuals’ level of self-control influences their perception of risk is critical to effective risk management and the improvement of individuals’ welfare. Those given to less self-control tend to place a greater value on the probability of an outcome rather than its risk. The reverse holds for individuals who exhibit greater self-control. A greater understanding of these drivers holds important policy implications. The results of the study argue for a more effective design of communications to promote self-control and mitigate risk in such areas as behavioral tendencies and product design. Further research could explore situational and contextual factors behind levels of self-control as well as other research that tends to take the opposite side of the authors’ conclusions.