The Risk Preference Calculator estimates risk preferences using three distinct methods. The first method is called "Take a Quiz" and uses a quiz from the psychology discipline developed by J. E. Grable and R. H. Lytton to calculate an individual risk tolerance score.
The second Risk Preference Calculator method for estimating risk preferences is called "Estimate My Risk Preference." This method uses the Equally Likely Certainty Equivalent methodology to estimate an individual coefficient of relative risk aversion and an individual relative risk tolerance score in the context of a cropping decision.
The third method provided is called "Industry Risk Preference." Based on data from a Harvard study, this method allows you to compare your personal risk preference score calculated in method two with other business operators that have similar net sales, net income, or net equity.
The Risk Preference Calculator provides multiple approaches to estimate your risk preferences. You can use this tool to learn about yourself and to compare your risk preferences to other managers with similar financial attributes. The Risk Preference Calculator is a tool that is especially useful for operations with multiple decisison makers, allowing them to learn about each other and how their individual risk preferences combine to affect the operation as a whole.