Question

Angela is doing a research project on individuals' willingness to take risks. She creates the following survey question to measure risk acceptance and aversion: "You can get $10 to keep, or you can turn in that $10 for a 1/10 chance of winning $100. Which would you choose?" Responses to the question are either 1) "Take $10" 0) "Chance it for $100". She reasons that the two choices yield the same value based on expected utility, the dollar amount multiplied by the probability of receiving a pay out ($10- $100 x0.10). She measures risk-averse as "Take $10" and risk-accepting as "Chance it for $100". In a short paragraph ( four sentences), evaluate the face validity of this measure. Be sure to explain why you believe this measure has strong or weak validity. (4 points) In a second paragraph, come up with your own measure of risk that could be asked on a survey. Be sure the following items are included in your discussion. (4 points) 1. 2. Write out your survey question and include responses available to the respondent. a. b. Explain your rationale for the measure. Do you think your measures has strong/weak face validity? Why? c.

Answer 1

1.

The measure has the face validity because it covers the concept of what it claims to measure.It is transparent in its purpose. And the participants would know the pupose of the measure.

This measure has a weak validity in this case because the participants are indifferent between the two given options as their expected values are same. Moreover, the difference between $10 and $100 is too much that the participants do not care for $10 and their eyes will be on $100.

2.

My own measure of risk is as follows:

a. Survey question is: Which one would you choose - "Take $40" or "Chance it to 1/5 of $100".

b. The expected values of two given options are not same and so, the participants are not indifferent between them. The difference between $40 and $100 is not too much compared to the previous measure. The expected value of second option is 1/5*$100 =$20 which is half of the first option($40). So, the risk averse participant would choose $40 while the risk accepting participant would choose 1/5 chance of $100 though it's expected value is only $20 indicating that he/she is really a risk taker.

c. I think my measure has a strong face validity because it covers what it is intended for. It is transparent and relevant in its claim of measuring risk. The participants would clearly know the purpose of the measure.