An Examination of Cross‐cultural Differences in Attitudes Towards Risk: Testing Prospect Theory in the People’s Republic of China

Abstract

A research stream known as prospect theory describes how decision biases lead to results that differ from those predicted by classical utility theory (Kahneman and Tversky, 1979). Prospect theory hypothesizes that individuals will experience potential losses more intensely than potential gains, and will be more risk‐seeking in loss situations, while more risk‐avoiding in gain situations. This study includes 948 participants from the PRC and 318 students from the USA. All of our attempts to replicate these findings in the Peoples’ Republic of China have revealed a different pattern. Chinese subjects consistently demonstrated risk‐seeking preferences, both in gain and loss situations.

Citation

Brumagim, A.L. and Xianhua, W. (2005), "An Examination of Cross‐cultural Differences in Attitudes Towards Risk: Testing Prospect Theory in the People’s Republic of China", Multinational Business Review, Vol. 13 No. 3, pp. 67-86. https://doi.org/10.1108/1525383X200500015