"Rational Fatalism": Non-Monotonic Choices in Response to Risk

Jason Kerwin, University of Michigan

Many health behaviors, from chemical exposure to unprotected sex, involve weighing definite benefits against uncertain costs. Previous empirical research has assumed monotonic, negative responses to such risks, where people always decrease the number of risks they choose to take when the per-act chance of a bad outcome rises. This paper shows that this need not be true if rational agents have a history of risk-taking with a still-unrealized outcome. In that case there exists a tipping point above which agents switch from negative (self-protective) to positive (fatalistic) responses to risks, even if they are unsophisticated in thinking about probabilities. I also demonstrate that the typical test for violations of monotonic responses can yield misleading results, and develop an alternative approach. I then apply my framework to decisions about risky sex in Malawi, finding suggestive evidence of non-monotonic behavior, and present preliminary findings from an RCT designed to test the model.