Decision-making under risk: financial goal, wealth, and reflection effect

Using three experiments, this study investigated how different kinds of financial goals influenced participants decisions under risk and how participants adjusted their risk strategies when the wealth level changed. All participants in the study were recruited from the undergraduate students in the University of Georgia. Using an investment game, it was found that participants became more risk seeking when wealth level increased in the gain domain. In the loss domain, participants became more risk averse as wealth level decreased. In addition, participants showed a risk preference reversal when they were very close to the preset well-defined financial goals. Unclear financial goals did not trigger the similar risk preference reversal pattern and participants in the groups without financial goals did not show risk preference reversal pattern.