The authors evaluate how an individual’s level of self-control influences his or
her construction of risk perceptions. There appears to be an inverse correlation between
level of self-control and the weighting of the probability of risks as opposed to their
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.
How Is This Research Useful to Practitioners?
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.
How Did the Authors Conduct This Research?
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
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
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.