ความรอบคอบ ความยับยั้งชั่งใจ และนโยบายสาธารณะที่ชาญฉลาดขึ้นเกี่ยวกับการบริหารความเสี่ยง: การศึกษา
For decades, research on decision-making under uncertainty has focused narrowly on risk aversion—the tendency to prefer a certain outcome over a gamble with the same expected value.
But new research by Dr. Sebastian O. Schneider and Dr. Matthias Sutter from the Max Planck Institute for Behavioral Economics, Bonn, at the Literaturhaus Munich shows this lens is incomplete. Their study highlights two overlooked dimensions of human behaviour: prudence and temperance.
Together, these higher-order risk preferences explain real-world choices that risk aversion alone cannot. Speaking to SiGMA News, Dr. Schneider, further emphasised the study’s significance.
Furthermore, this groundbreaking research earned Dr. Schneider and Dr. Sutter the German Young Researcher Award on Gambling Research 2026 for their paper, “Risk Preferences and Field Behaviour: The Relevance of Higher-Order Risk Preferences,” published in the American Economic Review.
Beyond risk aversion
According to the study, risk aversion (second-order) is familiar, as people prefer certainty over risk when they expect the payoff to be the same. But Dr. Schneider and Dr. Sutter show that real-world choices often hinge on subtler factors.
Meanwhile, prudence (third-order) is a preference for avoiding risks in “bad states” while tolerating them in “good states.” It mirrors precautionary behaviour, like saving more when future income is uncertain. Next is temperance, which is the fourth-order. This preference refers to spreading risks across different situations rather than concentrating them. It reflects cautious planning, like diversifying investments.
Together, prudence and temperance explain why some individuals have unhealthy behaviours or financial pitfalls while others fall into them, even when both groups are equally risk-averse.
The study
Beginning in 2018, the researchers surveyed 658 adolescents (ages 10–21) in German schools, combining experimental tasks with survey instruments. Having a unified framework allows for measuring risk aversion, prudence, and temperance using certainty equivalents via a dynamic bisection method with simple lotteries.
Additionally, they validated behaviour through adapted tasks from Eeckhoudt & Schlesinger (2006), simplified for adolescents, alongside survey measures (SOEP-style risk questions and DOESPERT adaptations). Other dimensions included time preferences, cognitive ability, and field behaviour (health, eco-friendly choices, prevention, and financial decisions).
By adopting a nonparametric approach, this avoids restrictive assumptions and yields robust intensity measures of prudence and temperance that previous parametric models failed to capture.
Why prudence and temperance matter
The study’s insights go beyond theory. Regarding health behaviours, prudence strongly predicts outcomes like smartphone addiction, smoking, and drinking. Additionally, financial decisions and temperance are linked to investment strategies and preventive choices.
As for policy relevance, adolescents with lower prudence and temperance are more vulnerable to risky behaviours. Targeted interventions for these groups could be more effective than broad-based campaigns. As Dr. Schenider explains, “Ignoring prudence and temperance can yield misleading conclusions about the relation of risk preferences to field behaviour.”
Implications for public policy
Other findings suggest that public health interventions should focus on adolescents with lower prudence and temperance, who are more vulnerable to risky behaviours such as excessive smartphone use or gambling. While most adolescents show resilience, tailoring interventions to those at risk could yield greater impact.
Temperance, in particular, offers insights for prevention strategies: individuals who fail to spread risks may accumulate extreme outcomes, including health risks. Policymakers could design programmes that encourage diversification, whether in financial planning or lifestyle choices, to mitigate these dangers.
What surprised the researchers
Although consistent with theory, Dr. Schneider notes the striking empirical power of higher-order risk preferences: they predict behaviour in domains where traditional measures of risk aversion fail, most prominently in financial decision-making and health-related behaviour, including addictive behaviour.
By integrating risk, time, cognition, and behaviour into one framework, Dr. Schneider and Dr. Sutter provide the first robust, adolescent-focused measures of prudence and temperance. Their work demonstrates that these higher-order preferences are critical for economics, psychology, and public policy, offering sharper tools to understand—and potentially shape—human behaviour under uncertainty.
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