Research also detected that risk perceptions are influenced by the emotional state of the perceiver (Bodenhausen, 1993). According to valence theory, positive emotions lead to optimistic risk perceptions whereas negative emotions incite a more pessimistic view of risk (Lerner, 2000).
The earliest psychometric research was performed by psychologists Daniel Kahneman (who later won a Nobel Prize in economics with Vernon Smith “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty”) (Kahneman, 2003) and Amos Tversky. They performed a series of gambling experiments to understand how people evaluated probabilities. Their major finding was that people use a number of heuristics to evaluate information.
These heuristics are usually useful shortcuts for thinking but may lead to inaccurate judgments in complex business situations of high uncertainty – in which case they become cognitive biases.
