Perceived control, nature of risk information and risk taking. An experimental test of a simple taxonomy of uncertainty

Uncertainty may be categorized along two dimensions: (1) the nature of probabilistic information (i.e. frequency information, about the outcomes of similar situations in the past, versus process information, about the way(s) in which a future loss might occur), and (2) the degree of personal control (i.e. the extent to which an activity's outcomes depend on internal factors (e.g. knowledge, skills) versus external (e.g. chance) factors). The effects of variations in both dimensions on people's risk‐taking tendency were experimentally studied. In a computerized task, subjects had to stop a fast‐moving symbol before it passed a target line. Success yielded a financial gain, failure led them into a ‘penalty task’ with the possibility of a considerable loss. On each trial subjects chose among 10 risk levels (varying symbol speeds): low levels resulted in small but almost sure gains, high levels yielded larger but less probable gains. Across subgroups of subjects, three penalty task characteristics were varied: (1) the actual loss probability, (2) the external versus internal determination of outcomes, and (3) the available risk information. Major findings were: (a) subjects did not set a lower risk level, but they did appear to be more attentive (i.e. they failed fewer trials) when the actual loss probability was lower; (b) internal outcome determination resulted in more failed trials (lesser caution); (c) subjects ignored frequency information, but were sensitive to process information. Results are discussed in terms of effort allocation for controlling risk during task performance.