Anil Wilkes 
The Iowa Gambling Task (IGT) is a neurocognitive task designed to assess decision-making under uncertainty. It comprises several 50/50 gambles that vary in terms of expected value and variance; additionally, this exercise allows individuals to identify risk-seeking tendencies.
As any entrepreneur, investor or gambler knows, risk capacity is an invaluable metric to have in their arsenal. It enables them to avoid making foolish assumptions which may result in disastrous outcomes.
Self-reported survey measures
Self-reported survey measures are an easy and quick way to gauge risk tolerance, with minimal cognitive effort required for implementation and minimal errors arising during administration. Unfortunately, they lack precise information regarding individual choice behavior and can be vulnerable to social desirability bias – where respondents overestimate positive behaviors while downplaying negative ones which leads to biased results and leads to responses which may not be reliable and therefore make surveys unreliable responses.
Self-reports may also be affected by the context and location of interviews. This is because environments and situations may provide cues that influence a person’s attitude toward desired behaviors, especially since survey instruments were not created to assess behaviors but rather attitudes and beliefs; consequently they can often be affected by hidden motivations that influence participants more in political experiments; for instance they might agree more readily with statements such as “The government should invest more money in education” than similar ones in other settings.
Incentivized choice measures
Researchers have utilized incentivized choice measures to elicit risk preferences. These methods involve providing participants with multiple choices with differing probabilities and payoffs; their odds ratio provides direct measurements of risk-aversion. Two such approaches – the HL and B/EG approaches – are commonly employed; in 2010, an independent researcher compared both measures against traditional surveys approaches; both yielded similar results.
Incentivized choice measures have not only proven their internal validity but have been linked with self-reported risky behaviors and decisions across various domains. Recent work has also examined their external validity using nationally representative surveys such as German Socio-Economic Panel (GSOEP) and UK Household Longitudinal Surveys; findings indicated these questions had strong predictive power yet may contain biases that go undetected when used by non-experimental economists.
Confirmatory factor analysis
Confirmatory factor analysis allows researchers to validate a relationship between observed indicator variables and latent variables. It differs from exploratory factor analysis in that investigators may already have some preconceived notions about what factors might be impacting data, so can use confirmatory factor analysis to test how well their model fits them.
The Iowa Gambling Task is a form of confirmatory factor analysis used to measure risky behavior, specifically gambling addiction and opioid dependence (Brevers et al. 2013; Ahn et al. 2016a). This task has been utilized in numerous research studies that examine decision-making among patients diagnosed with various mental illnesses including gambling addiction and opioid dependency (Brevers et al. 2013; Ahn et al. 2016a).
IGTs have also been used in comparisons between gamblers and non-gamblers. Many clinical studies (Upton et al. 2012) have found it an accurate measure of impaired decision-making among addicts; results can be seen using IGT parameters that allow comparison across groups.
Test theory
Test theory is an approach to psychometrics designed to address measurement error issues. It enumerates true score and error variables, enabling researchers to calculate reliability coefficients that take multiple sources of variance into account. This differs significantly from classical reliability which concentrates on item sampling variances rather than temporal variations in observed scores.
Bechara et al. (1994) pioneered one of the earliest tests of risk tolerance using the Iowa Gambling Task. Participants choose cards from four decks that win or lose sums of hypothetical money – two are riskier while three and four safer; this test shows that most gamblers tend to prefer secure gains over uncertain ones and demonstrate behaviors consistent with Prospect Theory.
However, subsequent studies revealed that many gamblers do not engage in risky choices. Furthermore, evidence points towards cultural differences having an effect on risk-seeking behavior; such as how women in matrilineal cultures tend to be less risk averse than men.
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