This paper conducted research on the relationship between scarcity and risk-taking, as well as how this relationship is moderated by neuroticism. The study employed established questions and tasks...Show moreThis paper conducted research on the relationship between scarcity and risk-taking, as well as how this relationship is moderated by neuroticism. The study employed established questions and tasks used in peer-reviewed papers. The study differed between the concepts risk tolerance and risk preference. Multiple linear regression was used to analyse the data, which was performed in SPSS. After analysing the data it was concluded that scarcity and risk-taking have a positive relationship when tested with the risk-tolerance variable. For the risk preference variable this effect was only present if gender was controlled. Neuroticism also moderates the effect of financial scarcity on risk-taking for the risk-tolerance variable, but not the risk-preference variable. It was found that neuroticism weakens the relationship between scarcity and risk- taking. The study contributes to literature about the effect of neuroticism on the tendency to take or avoid risks, as well as the literature on how scarcity can increase the tendency to take risks in practical setting such as treating those with gambling addictions or tendency to overspend. The paper was limited by its risk preference measure, which did not properly simulate a risk-reward scenario, contrary to the risk tolerance measure.Show less
The subjective experience of financial scarcity has gained conceptual significance in the past decade, expanding from the objective perspective of poverty. Scarcity theory entails that having a...Show moreThe subjective experience of financial scarcity has gained conceptual significance in the past decade, expanding from the objective perspective of poverty. Scarcity theory entails that having a scarcity mindset leads to counterproductive economic decisions that cycle the poverty trap. Therefore, the consequences of decisions made under uncertainty require investigation. The following study hypothesized whether financial scarcity increases the willingness to take risks and whether the effect is mediated by a type of positivity bias known as the illusion of control. Risk has multiple dimensions and is measured mainly as risk preferences and risk tolerance in the study. Each variable is measured in a questionnaire to British participants through an online query called Prolific (N = 100). The preliminary findings of the study indicated a positive relationship between financial scarcity and risk preferences, considering the influence of age and gender, though not when analyzed independently. Significant positive associations were discovered between financial scarcity and both risk tolerance and the illusion of control, aligning with initial expectations. Although the current line of research did not directly explore a mediation effect, it remained plausible that a weak effect might exist. Future studies are encouraged to acknowledge the problem of risk heterogeneity and focus on factors such as cognitive ability and emotions on financial scarcity to comprehend the dynamics at play.Show less
