PERCEIVED RISK AND CONSUMER DECISION MAKING
ABSTRACT The home economist has long been interested in effective family and consumer decision making and has tended to take a holistic or macro approach to decision theory. Recently, some applications of normative decision theory to consumer decision making—including the creation of rules for dealing with risk and uncertainty—have been advanced in home management textbooks. Since the early 1960s, consumer behaviour researchers in other disciplines have been developing a behavioural, micro-decision perspective centring upon the presence of perceived risk in the purchase decision of any customer. The empirical literature in home economics does not appear to have dealt with either of these perspectives. This paper identifies perceived risk as a useful analytical variable in the study of consumer product and store decisions and presents empirical data depicting the dual components of perceived risk and its four dimensions. The relationship of the normative and behavioural approaches to decision risk is discussed and implications for future research and application in home economics are identified.
SourceAvailable from: Carlos Flavián
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ABSTRACT: Experienced executives frequently try to modify the risky situations they face in order to make them more favorable rather than simply choosing from among available decision options. This article investigates several types of risk adjustments such as trying to influence the situation through bargaining and spending resources, gathering information, developing new options, and consulting one's superiors. A theoretical framework is presented that characterizes different types of adjustments and relates them to variables such as perceived risk, perceived control, perceived responsibility, decisiveness, and risky choice. The framework is tested using experienced decision makers who respond to four simulated risky business decisions.Journal of Risk and Uncertainty 06/1989; 2(2). DOI:10.1007/BF00056137
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ABSTRACT: Homebuyers and commercial real estate buyers who borrow funds using mortgages all must face the choice of whether to assume a fixed or an adjustable rate mortgage. Other mortgage forms with alternative characteristics are available, but the deciding question remains the same. Fixed rate mortgages never change over time, but have a high initial rate: adjustable rate, interest-only or hybrid mortgages begin with lower rates, but they change at fixed intervals over time. In contrast to professionals, consumers are often ill-equipped to understand the benefits and drawbacks of mortgage instruments. With poor product knowledge they may find the choice between fixed and variable rate mortgages overwhelming. They need help in making informed decisions. Giving the bulk of consumers the knowledge that a university level finance course conveys is not possible. Thus, there is a need for a simple applicable technique that can improve financial choice. This paper offers a straightforward forecasting model, to make the decision easier and relatively risk free. Adjustable mortgages are not always the best choice, especially in a rising interest rate market or one that has a strong possibility of rising. The model is a decision making tool that may help ordinary consumers make the best choice. Alternatively, mortgage company personnel may use the forecast to aid consumers in selecting the best mortgage.International Journal of Economics and Business Research 11/2007; 5(11 V5(11), 31-42, 2007):31-42.