Measures of perceived risk

Based on our previous work on the standard measure of risk, this paper pres ents two classes of measures for perceived risk by decomposing a lottery in to its mean and standard risk. One of the classes of our risk measures pres umes that there is no risk when there is no uncertainty involved, and the o ther allows different degenerate lotteries to be evaluated with different v alues of "risk." The former has more prescriptive appeal in risky decision making, but the latter may have more descriptive power for subjective risk judgments. Our risk measures can also take into account the asymmetric effe cts of losses and gains on perceived risk based on an appropriate choice of the standard measure of risk. The perceived risk models we propose unify a large body of empirical evidence regarding risk judgments, and provide suf ficient flexibility to better capture people's perceptions of risk than pre viously developed risk models, in particular, our risk measures provide cle ar ways to accommodate financial measures of risk and psychological measure s of risk, and they can be incorporated into preference models in an appeal ing form based on mean-risk tradeoffs.