Social Risks Perceptions: Lets Eat!

William Rhyne, MBA, DBA Graduate School of Management University of California Davis, CA Home Address: 601 Ferguson Road Sebastopol, CA 95472 U.S.A. Phone/fax: 001(707) 824-1440 Mobile: (510)219-5934 e-mail: bill_rhyne@yahoo.com Content Area: Cross-cultural comparison of perceptions Methodological Area: Quantitative Bio: William Rhyne is a lecturer in the UC-Davis MBA program, an adjunct professor of marketing at the Ageno School of Business, Golden Gate University, Keuka Colleges China Overseas Program, and the Academy of Art Universitys School of Fashion. His research interests focuses on cross-cultural comparisons of decision making at the consumer and entrepreneurial level.

Electronic copy available at: http://ssrn.com/abstract=1373961

Social Risks Perceptions

Abstract: This study explores risk perceptions in social settings. Part of building business relationships involves informal activities outside of the firm where individuals can spend some time getting to know each other with the purpose of building better relationships. This study examines the social risks perceptions in the dining out experience by varying the social relationship context. Data was collected in the U.S.A. and China to also consider national culture. Key words: cross-cultural, China, social risks, hedonic consumption

Electronic copy available at: http://ssrn.com/abstract=1373961

Social Risks Perceptions

Introduction 1. Introduction This study examines how differences in risk perceptions vary across national cultures and social contexts. Individuals receive and process stimuli that are filtered through a type of lens that incorporates the societys cultural influences, the individuals learned, intrinsic, and interpretive capabilities, and the situational contexts. In studies that compared the differences in risk perceptions and preferences between Chinese and American students, Weber and Hsee (1998) suggest that in collectivist cultures, such as Chinas, part of the difference in risk perception in an investment decision is explained by their social cushion hypotheses, where a Chinese investor may value an option more highly due to a lower perceived risk. The lower risk assessment of the investor is due to the knowledge that his identified in-group (family or social network) will not let him fail as it would not look good for the whole group. Members will take part in activities, such as regular communications, to maintain membership in the in-group. In consumption settings, Wong and Ahuvia (1998) propose that this collectivist consumer behavior has implications in luxury brand or conspicuous consumption. In this case, a consumer may prefer a product or brand less to their individual liking but more to the in-groups liking as the act of owning or consuming a certain brand symbolizes a positive cue, such as success or sophistication. In this case, the individuals consumption decision reflects back to him positively or negatively depending on his aspirant reference group. Markus and Kitayama (1991) suggest that the boundaries between the identified independent self and the interdependent self can have implications for cognition, emotion, and motivation which can alter decisions. In the independent-self orientation, the decisions may be optimized for the individual where in the interdependent-self orientation, the decisions may be optimized for the identified in-group, not necessarily the individuals preferences. In the collectivist orientation, the individual sacrifices his personal preferences or pleasure for the benefit of the group. Therefore, consumption can have other meanings besides the purely utilitarian or hedonic aspects. There can be other meanings that can be extracted from the consumption experience. The idea of maintenance activities for group members may call for reciprocity. In double entry

accounting, an entry on the debit side requires another entry on the credit side. The benefit of the social cushion comes with a cost to the consumer and the cost is part of the calculation for value delivered by the in-group assurances to cushion a misstep made by another member of the in-group. This cost may be a less optimized personal choice but a more optimized collective choice. Another interpretation could be that ones enjoyment or satisfaction is derived through the perceived enjoyment or satisfaction of the in-group members. One other interpretation that could be made is that an individual consumer is oriented in a holistic manner in which they perceive themselves as part of a social and/or environmental fabric and not a separate being. This type of orientation might be referred to as a holistic orientation.

2.0 Concept and Literature Review Prior research (Triandis, 1989; Markus and Kitayama, 1991) has investigated the relationships between the self, the collective group where the self resides, and the consumption experience. According to Triandis, the more the individualistic the culture, the more referent to the private self, which I interpret as similar to the independent-self concept. The more collectivist the culture, the more referent is the behavior to the collective, or interdependent self. Where Western literature explores the consumption experience from the individualist or independent perspective, this approach may not totally capture the experience of cognition and perception in the consumption experience for an individual with a collectivist or interdependent orientation. Western literature works on the assumptions derived from belief in free will where individuals are free to make their own decisions on their behavior, and rationality where individuals want to maximize their utility or self-interest. In interdependent contexts though, these assumptions may prevent the researcher from capturing the true experience as the context may determine the individuals behavior and it may not be self-interested maximizing behavior but in-group collective maximizing behavior. The payoff for the individual may come in another consumption context, as suggested by Weber & Hsees social cushion hypotheses, or from the benefit of fitting in with the group. This study attempts to examine this area of consumption context more closely. This section reviews the literature at the intersection between risks assessment in decision-making, national cultural differences, and hedonic consumption in solo and social

contexts. As Chinas market is expected to become ever larger and more important as its consumer market expands, international marketers need to understand more about Chinese consumer attitudes, preferences, perceptions, and behavior. How are Chinese consumers different or similar when compared to American or other Asian consumers? More specifically, what happens when decision making processes involve risk or uncertainty? How do the individual roles within various social settings affect risk perception? Are risks perceived similarly or differently? To provide background, a review of the risk, decision-making, consumer behavior, and cross cultural literature is useful.

Risk Discussion What does risk mean in the consumer context? Risk relates to the certainty or uncertainty of making a wrong choice and of the severity of the consequences. People have difference attitudes, preferences, and perceptions of risk based on varying factors, such as the individuals role, education, culture, or financial situation. Cox and Rich (1964) define perceived risk as the nature and amount of risk perceived by a consumer in contemplating a particular decision. In previous research by Cox, he developed a broad hypothesis that in making buying decisions, consumers adopt strategies of risk reduction which may have substantial effects on their buying behavior. Consumers will seek out information or rely on existing information, which could come from past experiences. According to Bettman (1973), perceived risk consists of components and he partitions risks into two constructs: inherent risks and handled risks. Inherent risk is the latent risk a product class holds for a consumer and handled risk is the amount of conflict the product class is able to arouse when the buyer chooses a brand from a product class in his usual buying situation. Perceived risks can vary with product category. For a person to buy bottled water, the category may not represent much risk. For a person to buy a more information intensive hedonic product such as wine, the buyer may perceive more risk. Perceived risks can vary by brand, a buyer perceives lower risks for a famous brand, such as Mondavi or Gallo, and perceives greater risks for an unknown brand of wine. In the China context, the product category and the brands for wine may appear both to be risky as both represent relative unknown entities to most of the population. Bettman also found that these components in the additive model worked better than

in the multiplicative model. This finding would suggest that consumers add or subtract the components when adjusting for risks. What are the perceived risks related in a hedonic consumption context, such as dining out or wine consumption? Mitchell et al (1988) considered the UK wine market and identified four major perceived risks: financial, functional, physical, and social. Regarding the financial risks, they suggest that wine costs should be considered relative to the total disposable income of the purchaser. Lower income consumers, such as college undergraduate students, would perceive more risk than higher income consumers. Functional risks relate to the acceptability of the taste of the wine and whether it is suitable for the occasion or meal. Physical risks of wine relate to the potential for harmful results related to tainted wine, allergic reactions, or repercussions from overconsumption, such as a hangover. Social risk involves selecting the right wine to gain approval of the purchasers reference group, such as family, friends, business associates, or wine enthusiasts. In the Chinese setting or cultures with a collectivist or interdependent orientation, it has been suggested that consumption is viewed more holistically in that ones consumption experience may be dependent on not the enjoyment of the individual but the enjoyment of the whole group. Mitchell et al (1988) found the top three perceived risks to be: the taste of the wine, whether the wine complemented the meal, and the approval of family and friends. Where there are the risks of the wines taste and whether the wine complements the meal, one can also differentiate from individualistic independent enjoyment and collectivistic interdependent enjoyment. To the extent that this enjoyment is at risk when attempting to make an appropriate consumption decision in a social context, the individual deciding perceives some amount of risk. Another risk is the risk of a less than optimum good time or fun time. Consumers cannot roll the clock back and redo a Friday night dinner event or party. The experience lives on in the collective groups and the individuals memories. Assuming that a consumer can or does perceive risk, is the consumer risk averse, risk seeking, or risk neutral? What are the consumers risk preferences? Hsee and Weber (1997) state that manufacturers need to know the risk preferences of their consumers. Their risk-asfeelings hypothesis proposes that when people make a risky choice themselves, their decision is influenced by their subjective feelings or anticipatory emotions toward risk. Weber and Hsee (1998) define risk preference as a label used to describe a persons choice when faced with two options that are equal in expected value but differ on a dimension assumed to affect the riskiness

options. Kahneman and Tversky (1979) found the tendency for people to be risk averse in choices involving sure gains and risk seeking in choices involving sure losses. In the hedonic context of Friday night entertainment choices, this would suggest that perhaps interdependentoriented consumers will choose to minimize risks by choosing the activity that assures a good time for all. When comparing risk preference predictions between Chinese and Americans, Hsee and Weber (1999) found that Chinese were more risk-seeking than the Americans, contrary to an assumed stereo-type that Americans are more risk-seeking that Chinese. According to their explanation, the Chinese perceive the risks in the same uncertain option as less risky and hence appear to be more risk-seeking than the Americans. Consequently, individuals who perceived the risk of an option to be smaller were willing to pay a higher price for this option. In Hsee and Weber (1998) their example was a financial decision and they proposed a social cushion hypothesis to suggest that Chinese investors actually prefer risk similarly as American investors but they perceive less risk because of the support provided by their social network. They found Chinese to be more averse to social risks, which they relate to the social cushion aspect. To conclude this section, consumers with an interdependent self-orientation may perceive more risks in social consumption contexts or at least be less comfortable in making group consumption decisions. While the previous discussion is about risks perceptions, the next section discusses the concepts related to hedonic consumption.

Hedonic Consumption How do consumers calculate value for experientially sensory oriented products or services? Holbrook and Hirschman (1982) quote Klingers statement that the consequences of consumption appear in the fun that a consumer derives from a productthe enjoyment that it offers and the resulting feeling of pleasure that it evokes. They refer to this type of consumption as hedonic consumption, which they designate as those facets of consumer behavior that relate to the multisensory, fantasy, and emotive affects of ones experience with products. They propose that sensory-emotive stimulation seeking and cognitive information seeking are two independent dimensions. Hsee and Rottenstreich (2004) state that hedonic goods may be thought of as affect-rich, and utilitarian goods as affect-poor. They also suggest that affect may influence not only scopesensitivity, but loss aversion as well. Valuation by feeling is highly sensitive to the presence or

absence of a stimulus. In their research, they considered the experience of listening to a musical CD compared to receiving cash. Music is considered affect-rich where cash is considered affect-poor. In their study, they found that affect-rich items were scope insensitive where affect-poor items were scope sensitive. In their example of a picture of a cute Panda bear, a picture of four cute Panda bears did not enhance feeling four times that of one bear. When offered $100 versus $400, most people will choose the larger amount as they assume greater utility. For affect-rich products, more of a good thing is not necessarily better as people reach a satiation point more quickly. The quality of the experience is more important than the quantity of the experience. To the degree that a product can deliver an experience inherently, or due to other considerations of service, personnel, or image, the consumer will then value the consumption experience. How responsive and knowledgeable was the server or retail clerk? Was the server friendly? Was the brand image or location of consumption or purchase consistent with the purchasers values? These experiences are tallied against the costs and associated risks to assess the customer delivered value. While there is some nutritional or functional value to the consumption of food and beverages, consumers appreciate the esthetic or symbolic value of hedonic products or services. For example, some fine wine wines are considered an expression of winemakers ability to manage the uncertainties of nature, as represented in the land, fruit, and weather season variations, in order to deliver a sensual experience to the wine consumer. As wine is usually a part of a meal and often at a restaurant, the setting for consumption can enhance the experience esthetically or experientially. While an individual can get sustenance from eating simple food at home, dining at a nice restaurant potentially offers a more rich experience, which when shared with others, can promote group cohesion. Other types of typical socially oriented hedonic consumption contexts would include attending music concerts or a movie theatre, for example. An individual could attend alone or with a group.

Decision-Making in Consumption Herbert Simon has described the buyers cognitive behavior as being bounded rationality, where the decision is rational based on the perceptual and maybe situational constraints of the buyer. Williamson (1985, 2003) further specified that buyers have different levels of foresight which can affect the quality of the buying experience. To the level that the

buyer understands the choice and can see the future as predictable or uncertain, then he/she can attempt a relatively informed choice based on what he/she believes to be true and considers important or valuable. This line of thought assumes that decisions can be described as purely cognitive processes. This may not be true or only partly true as emotion may affect decision making also. Loewenstein et al (2001) address the idea of risk as feeling where emotional reactions to risky situation may diverge from cognitive assessments. Emotions may offer another type of information processing that serves the decision process. Some ideas and items are considered universally valuable, such as water or life or family. Others are more culturally specific or experientially oriented. In buyer behavior models (Kotler, 2003), the buyer is subject to marketing stimuli (product, price, place, promotion) and other stimuli (economic, technological, political, and cultural). The buyers behavioral characteristics are grouped according to cultural, social, personal, and psychological characteristics. With regard to the psychological characteristics, the individuals motivation, perception, attribution, learning, beliefs, and attitudes can affect the buyers decision process and decision. The buyers decision process consists of: problem recognition, information search, evaluation of alternatives, purchase decision, and postpurchase behavior. The buyers decisions consist of: product choice, brand choice, dealer choice, purchase timing, and purchase amount. This process represents the cognitive process in decision-making where Loewenstein et al (2001) add the additional processing of emotions. In buyer behavior models, culture can serve to stimulate buyer behavior by communicating additional information or by triggering emotional reactions. Culture can stimulate behavior with regard to how or how much a product is consumed or it could be that the product is a cultural artifact or symbol of the culture. The product has symbolic meaning as it could signal ones belonging to certain group or culture (Dubois, 2005). In addition, the buyers cultural orientation describes part of the buyers characteristics, which can affect the decision process, such as information processing or search, and finally, the decision.

Cross-Cultural Research: Comparing Chinese Culture and American Culture If the decision entails uncertainty or assumption of risk and if culture is one of the factors that affects the buyer decision process, then it is interesting to understand how consumers or

buyers in different cultures deal with risks in buying decisions. My interest is to understand how dynamic or variable are risk perceptions in varied social settings. The previous discussion was concerned with the consumer decision making process as understood and discusses in the marketing literature. The next section introduces the terminology and concepts of cross-cultural research. According to Weber et al (1998), cross-cultural research seeks to secure differences in overt behaviors between members of different cultures and to identify underlying cultural values that drive overt behavioral differences. Weber and Hsee (1999) state that a cultural difference is a national (or other subgroup) difference in attitude or behavior that is the result of group differences in stable social sciences and/or long-standing values. They also suggest that cross-cultural differences could include differentiation into subcultures on such factors as gender and ethnicity.

In Hofstede (2001, p.9), he offers Kluckholms well-known anthropological consensus definition of culture:

Culture consists in patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional ideas and especially the attached values.

Hofstedes work centered on national culture and much his data was collected over 25 years ago and China was not part of his original data set. The Globe Study collected data in the 1990s and China was included in the study. For the purposes of this paper, I want only to suggest that national culture has an impact on the buyers decision process and it is important for marketers to know how close or distant the two countries are with respect to their national culture orientation. Hofstede initially identified four basic dimensions of the differences between national culturespower distance, uncertainty-avoidance, individualism/collectivism, and masculinity/feminism. Later, Hofstede and Bond added long term orientation. This paper focuses specifically on the collectivist/individualist dimension. The individualism (IDV) dimension focuses on the degree to which the culture encourages individual, as opposed to collectivist, group-centered concerns. A collectivist culture

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is characterized by a tighter social framework, in which people are members of extended families or clans that protect them in exchange for loyalty. This dimension is central to the research for this paper as it suggests the concept of reciprocity where protection is offered in exchange for loyalty. It supports the notion of the social cushion. Below is a table comparing scores from Hong Kong, Taiwan, China, and the U.S.A. The absolute scores for our purposes are important mostly due to the similarity or difference. Where the Chinese society is similar to American society, decisions where culture plays a strong part may be not be affected. There is a potential for decision process variation where there are strong differences. In the data below, Hong Kong and Taiwan serve as proxies for China as China was not part of Hofstedes original data set. Given the dynamic nature of Chinas environment, it would be important to determine if how close China scores on these dimensions to assure validity the claim that China still has a collectivist disposition in its culture. The data from the GLOBE study serves to demonstrate that Chinas culture is still considered relatively more collectivist than the USA and similar to Hong Kong and Taiwan.

Table 1. Hofstede data (100 point scale) Dimension PDI IDV MAS UAI LTO Hong Kong 68 25 57 29 96 Taiwan 58 17 45 69 87 China NA NA NA NA NA U.S.A. 40 91 62 46 29

The GLOBE study continues in development and refinement of cross-cultural differences research begun by Hofstede. Their data is not exactly comparable to Hofstedes but I present it here because China was included in the research data collection and it offers the recent data and clarifications. The GLOBE uses a 7 point scale and some of the terms have been modified. They surveyed informants based not only on their view of how a culture should be, but also how it is. In the GLOBE study, Societal Institutional Collectivism (SIC) higher scores indicate greater institutional collectivism. A higher score means that people place more trust in their societal institutions, which could be non-government organizations, such as charities for example.

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Societal In-Group Collectivism (SIGC) higher scores indicate greater collectivism. SIGC relates to collective behavior at the family level. Power Distance (PDI) higher scores indicate greater power distance. Uncertainty Avoidance (UAI) higher scores indicate greater uncertainty avoidance.

Table 2. GLOBE Study data (7 point scale) Dimension SIC/SIGC PDI (as is) UAI (as is) Hong Kong 4.43/5.32 4.96 4.32 Taiwan 5.15/5.59 5.18 4.34 China 4.56/5.80 5.04 4.94 U.S.A. 4.17/4.25 4.88 4.15

Using the Hofstede and Globe Study data, the USA national culture appears on average to tend towards more individualism versus collectivism or group orientation. With regard to power distance, Hofstedes USA scores are on the lower end of the scale but on the GLOBE study scores, the USA scores on the higher end of the scale and not too dissimilar from the Chinese scores. This variation could suggest cultural dynamism and change that may be occurring since 1980 when Hofstede collected his data. Munusamy et al (2006) suggest possible cultural convergence. With regard to uncertainty avoidance, the USA scored in the middle on Hofstede survey and somewhat in the middle on the GLOBE study. If the GLOBE data represents more current national cultural climate, it appears that China and the USA differ most significantly on the IDV and the UAI scores, where China tends to be a little more collectivist in nature and tends toward more uncertainty avoidance. In order to understand how these dimensions appear in the decision process, we can refer to the work of others in this field. Weber et al (1998) compared American, German, and Chinese proverbs to identify differences in attitudes towards risk and risk-taking. They found that German and Chinese proverbs offered more risk-seeking advice than American. According to Hofstedes data, American culture values individualism more than social collectivism, which is valued more by the Chinese and Germans. They proposed a cushion hypothesis to explain this finding. They suggest that in the case of financially or materially risky choices, Chinese will be more risk seeking that Americans because they have a social network to fall back on. Collectivism acts as a cushion against possible losses which they suggest serves as social

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diversification of the risks of risky options. The cost of this social insurance provided by the network is the cost of maintaining the network through personal obligations or roles. Weber and Hsee (1998) found that across the four cultures that they studied, they found the majority attitude was perceived-risk averse. Consequently, the Chinese may be more risk averse in socially risky situations because the risks are not only assumed individually, but also by being a member in a collective social group, such as a family or people who share their language and culture. This concept appears related to the previous discussions regarding the interdependent-self orientation. Given the chance of making a wrong decision, they risk their personal, as well as local ingroup reputation or face. The in-group could be their family or work unit, for example. What is meant by face? According to Wong and Ahuvia (1998), the dimension of face pertinent to material values is the concept of mein-tzu (mianzi): Which stands for reputation achieved through getting on in life through success and ostentation. People in Confucian culture are always under pressure to live up to the expectations of others in order to preserve face. Kotler et al (1999, p. 194) also describe mianzi, as well as another type of face called lian which is the confidence of the society on an individuals moral character. They list several implications for consumer behavior: the influence of referent others to accord them their respect or to comply with social norms, ostentatious living to assert social standing, fewer complaints because harmony is strived for, discomfort with comparative advertising, use of a mediator in negotiation to protect their prestige, and reluctance to acknowledge failure which will lead to lingering product lines past their prime. In the case of a new and unfamiliar product or service that is consumed in a public manner, such as fine wine at a dinner, the Chinese consumer may not want to assume the risk of looking bad or picking the wrong wine. This event might cause the loss of face. To mitigate or handle this type of risk, this type of consumer may choose an expert to guide the decision or a famous brand that offers certain satisfaction. Or they may choose not to choose.

Conclusion From this review, it is interesting to see how the issue of introducing experientially and sensory rich hedonic products into a consumer market with little product knowledge or experience represents a risky situation for the new consumer segment. How will the consumer respond? Hirschman (1982) proposes that individual differences in ethnic background, social

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class, and gender cause products to vary greatly in the emotions and fantasies they inspire in a consumer. These ideas suggest that culturally diverse consumers have different experiences when consuming a hedonic product. While much attention of the marketing mix strategy is often focused on the proper pricing, promotion, distribution, and product characteristics, the consumer response to such stimuli will be filtered through their personal cultural (or subcultural, ethnic, gender, etc.) lens, which will affect their perceptions, attitudes, choices, consumption, experiences, affects, behaviors, and evaluation. Segmentation of the dynamic Chinese consumer market is unstable due to the changes in the socio-economic situation. From personal observations, consumerism, as experienced in U.S.A, is new to China. Chinese consumers are faced with decisions and choices that were not available to the previous generation. On the push side of the equation, marketers provide information to stimulate action or desired behaviors. On the pull side of the equation, the consumer has physical, intellectual, and emotional needs that may be addressed by marketers offerings. How will the two sides find each other? One avenue for answering this question is to study and understand the Chinese consumers decision-making under risk or uncertainty and in varying situational contexts. The basic concept as mentioned earlier is that national/ethnic culture> perceptions and values> information processing and attitudes> consumption behaviors> experience and learning. The purpose of this study is to attempt to capture and measure the effect of national culture and situational social contexts on risk perceptions. I propose that even in hedonic consumption contexts, national culture and social contexts influence risk perceptions. Where collectivist culture is more predominant, the risk perceptions in social contexts involving in-group and out-group participation contexts will be higher than in alone contexts. My dependent variable is risk perception and my independent variables are the national culture and the social consumption context.

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Alone, family, friends, romantic date, or business associates National Culture Individualist or Collectivist Social Context Risk Perception

Independent Self or
Interdependent

Self

Theoretical Framework

Based on previous research by Hsee and Weber, I assume that collectivistic national culture orientation leads to lower risk perception than individualistic national culture orientation. According to their conclusions, Chinese perceive risks lower in financial settings but higher in social settings. This leads to the following propositions for this paper. Proposition 1: In social settings, Chinese will perceive risks higher than Americans. Proposition 2: The alone consumption context will be perceived as less risky. Proposition 3: In-group (friends, family) consumption context will be perceived as more risky. Proposition 4: Out-group (first date, business associates) consumption contexts will be perceived as most risky.

3.0 Study Methodology For the purposes of exploring the effects of national culture and social contexts on consumers risk perceptions in hedonic activities and consumption, I chose a survey questionnaire design for the pilot study. For this study, the items were selected based on the

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researchers knowledge of the respondents experience and knowledge with the decision situations involved in planning a fun time on a weekend night. Other random items were added to stimulate the respondent to consider other moderately risky everyday decisions that they may encounter and to disguise the main purpose of the study. The researcher did not want to lead the respondent.

3.1 Research Participants

For the first part of this study, a pilot survey was conducted using 43 graduate students at two schools in San Francisco. Further data was collected from 214 Chinese undergraduates in the Peoples Republic of China. The questionnaire instrument was translated by a native Chinese professor into Chinese Mandarin and reviewed by two other native Chinese speakers for accuracy. The instrument offered the English and Chinese together to minimize confusion regarding meaning. The questionnaire was administered by a visiting American professor at one location and by the author at another location. 3.2 Questionnaires and Procedure The questionnaire asks the respondents to rate the perceived riskiness of a consumption decision from 0 for no risks to 10 for maximum risk perceived. A total of 40 consumption situation items were chosen and put in random order. Of the forty items only 24 were of interest for this study. The other items were less related and were included in order to disguise the specific purpose of the study. In choosing the items, selection was based on the probability that the respondent had experience with these types of decisions. Everyone looks forward to a fun Friday night!

3.3 Operationalization of Risk Perception and Independent Variables. In this study, the independent variables are national or ethnic identity and the social contexts (alone, friends, family, romantic date, business associates, home, public settings) and the dependent variable is risk perception. Confucian cultures have been identified (Hofstede, 2001) as representative of collective or interdependent cultures, where American culture has

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been identified as representative of individualistic culture. Other variables that could have an effect of risk perception are experience, sex, age, and education level and type. The China sample was more homogeneous than the USA sample based on age, education, and work experience. The number of women as a percentage of the total was larger for each group. 3.4 Study Instruments: In this survey, respondents are given situations where there may be some level of inherent risk in the context. The respondents assign a score of 0-10 on a dyadic scale, where a score of 0 represents no perceived risks and a score of 10 represents the highest risk. The assessment is for a generalized perception of risks so various types of risk are not assessed in this study. The advantage of this study is that the specific contexts can be extracted out for analysis based on consumption category or situation. Mean score for risk perception for the differing groups and contexts was compared. The study involved a 2 x 2 x 1 where culture and context are the independent variables where the treatment or condition (X) will be additional information relating to social context in the consumption experience. This study attempted to capture a likely situation that demonstrates the existence of this phenomenon where risks exists in an interdependent collective consumer context but does not exist in the independent individualistic context. It has been suggested that gender can affect the perception of independence versus interdependence so we will control for this variable in the experiment. 3.5 Items for Questionnaire The bilingual questionnaire with instructions is attached to the end of this document. Extra items were included to disguise the specific purpose of the research and to stimulate the respondents to consider risks. The respondents were told to consider the risks that they face on a Friday night from selecting transportation to selecting a restaurant and traveling out. 4. Results In this section, we discuss the decisions related to dining out, beverage selection, entertainment selection, and a functional decision of selecting a plane ticket.

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4.1 Dining Out Decision In the dining out decision, the China sample was consistent in assessing the perceived risks lower than the USA group. For the USA sample, the mean score differences for selecting a restaurant for dinner with the in-group (family or friends) was not significantly different but they were significantly different in the positive direction for the out-group (first date or business associate). For the China sample, each social context was significantly different but risk perceptions were lower for dining with friends or family than alone. This is contrary to my hypotheses. Risks were perceived as higher for the out-group setting.

Dining Out Decision U.S.A. Mean 2.548 5.857 6.357 China S.D. Sig. Mean 2.606 1.87 2.6 * 3.24 2.229 * 3.45 Social Context

S.D. Sig. 1.717 Choosing a restaurant to eat alone 2.398 * Choosing a restaurant for a romantic first date 2.031 * Choosing a restaurant for a business associates dinner 2.881 1.841 1.32 1.634 * Choosing a restaurant for a dinner with family 1.976 2.089 1.24 1.609 * Choosing a restaurant for a dinner with your good friends (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.)

4.2 Beverage Selection Decision In the case of selecting a bottle of wine at home versus in public, both groups significantly perceived more risks in the restaurant context. This could be explained in one part by the increased financial cost of wine when it is served at a restaurant but the decision also represents a public decision for the consumer so his/her choice is observed by an out-group (server, restaurant patrons) which appears to increase his/her perception of risk. The first date context was significantly higher for both but the USA group mean scores suggest that the public setting and the first date context both contribute to increased risk perceptions where the China group did not appear to perceive significant differences in risk alone or with a first date when selecting a wine.

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Beverage Selection Decision U.S.A. Mean 2.071 3.238 4.881 China S.D. Sig. Mean 1.772 1.06 2.173 * 2.19 2.381 * 2.56 Social Context

S.D. Sig. 1.600 * Selecting a bottle of wine to drink at home 1.908 Selecting a bottle of wine to drink at a restaurant 2.230 * Selecting a bottle of wine to drink at a restaurant with a romantic date 3.143 2.674 * 1.20 1.662 * Selecting a bottle of wine to drink at a restaurant with family 1.833 1.48 .99 1.515 * Selecting a bottle of wine to drink with family at home 3.119 2.287 * 2.11 1.806 Selecting a bottle of wine to drink with friends at a restaurant (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.) 4.3 Wine Consumption Context One of the risks of wine consumption is the varying abilities of individuals to consume alcohol and to control their behavior if intoxication occurs. For the China group, consuming local Chinese red wine alone is less risky than consuming California red wine with friends. Part of the difference for the mean scores for both groups is related to familiarity with each others local wine but introducing friends into the context appeared to increase the perception of risk for the USA group but not the China group. Wine Consumption Context U.S.A. China Social Context Mean S.D. Sig. Mean S.D. Sig. 2.38 1.937 2.14 1.835 Drinking California Red Table wine with friends 4.024 3.28 * 1.98 2.143 Drinking Chinese Red Table wine alone 4.857 2.737 * 1.87 1.876 * Drinking Chinese Red Table with friends (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.) 4.4 Movie Selection Context In selecting a movie to see on a Friday night, risk perception was significantly lower for the both groups when the family was included. Perhaps the idea that going out at night on Friday is safer with family and the risk of not enjoying the movie experience is not that great. For the

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USA group, introducing the romantic date context increased the risk perception but not for the China group. This finding might be explained if the dates enjoyment of the movie is not expected to be similar to the enjoyment of the one who chose the movie.

Movie Selection Context U.S.A. Mean 2.728 China S.D. Sig. Mean S.D. 2.642 2.6 2.29 Social Context Sig.

Deciding on a movie to see alone on Friday night at a theater showing 1.857 1.336 * 1.19 1.666 * Deciding on a movie to see on a Friday night with family 2.667 1.748 1.99 1.922 * Deciding on a movie to see on Friday night with friends 4.786 2.394 * 1.92 2.021 * Deciding on a movie to see on Friday night with a romantic date (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.)

4.5 Live Music Decision This item requires a little explanation. In 1996, the author was asked to help to promote a Chinese folk musician and composer who was collaborating with American jazz musicians to create a new sound that merged Chinese folk melody elements and sounds with an American jazz improvisational context. In marketing terminology, this new and unknown groups sound was a new-to-the-market, if not new-to-the-world, so the potential audience was faced with a very uncertain decision as to whether to attend the concert or not. In addition, those who attend may have trouble processing the sounds that they heard as there may have not been a reference point for them. For the USA group, the concept appeared more risky than for the Chinese group but buying one ticket for yourself versus two for yourself and your friend did not increase the risk perception. For the China group, they perceived the concert option as less risky but risk was significantly increased when the decision was to buy a ticket for yourself and your friend. Perhaps an explanation is that a Chinese music fan will be curious about the new band but he will be reluctant or concerned whether his friend will be equally curious or interested in the experience.

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Live Music Decision U.S.A. Mean 4.357 China Social Context S.D. Sig. Mean S.D. Sig. 2.907 1.41 1.926 Buying 1 Concert Ticket for yourself to listen to a Chinese Jazz Fusion band 4.881 3.214 2.10 2.018 * Buying 2 Concert Tickets for yourself and your friend to listen to a Chinese Jazz Fusion band (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.)

4.6 Buying an international airline ticket Decision

For some people, international travel may be considered fun and for others it is work. The decision to buy a ticket though may be considered more along the lines of a utilitarian decision than a hedonic consumption decision as travelers try to maximize their traveling money by looking for discount prices. With regard to my China group sample, they are young undergraduates so they may have not faced this decision yet, since most have probably not traveled internationally and their work experience consists of part-time work experiences, which most likely did not involve purchasing international airline tickets for their boss. Still, they significantly perceived higher risks in purchasing a ticket for themselves and their boss when compared to just themselves alone. For the USA group which was on average older and experienced with international air travel, buying a ticket as an individual was perceived as significantly less risky that purchasing for the in-group (family or friend) and out-group (boss). Buying an international airline ticket Decision U.S.A. Mean 2.881 3.738 China Social Context S.D. Sig. Mean S.D. Sig. 2.255 1.85 1.791 Buying an international airline ticket for yourself 2.47 * 3.81 2.757 * Buying an international airline ticket for your parents 3.738 2.296 * 2.21 1.737 * Buying an international airline ticket for you and your friend 5.19 2.511 * 6.31 2.421 * Buying an international airline ticket for you and your boss (* means that the p-value <.05 with reference to the alone context for each culture, China and the USA.)

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5.0 Discussion This study demonstrates that the two samples differed in their perceptions of risk on average by nationality and by social context. The Chinese sample scored lower overall risk perceptions in social contexts on average than the USA sample group. This finding did not support the proposition that Chinese may be more risk averse in social settings. This finding could be possibly explained by the young age of the Chinese sample. The social setting results suggest that the social context propositions were supported. So, even when consumers are intent on having a good time, there is a possibility of the perception of risks affecting the fun or emotional satisfaction of an entertaining experience. The feeling of risks can be negative in terms of stress or it could be positive in terms of excitement. In most of the cases, friends are considered in-group members and so the risks levels are not perceived higher. Social events with business associates or romantic dates raise the level of risk perceptions. If the social event has the purpose of maintain a social cushion as Hsee suggests, then the cost of maintaining that social cushion is found when the consumer sacrifices his pleasure for the pleasure of his social support network. While this is the area of interest for the study, it is not clear if it has been demonstrated. What can be said is that there are higher levels of risk perception in hedonic consumption activities in social contexts where a romantic date or business associates are involved and this is true for both groups in the survey. Dining out has many purposes so it has many meanings for those dining. One of those purposes is to build or establish good working or romantic relationships, as well as maintain existing social relationships. Another is to foster communication amongst participants. Since the hospitality and entertainment business are large businesses involving consumers discretionary time and money, there is benefit to understanding how risk perceptions affect consumer decisions or satisfaction in these hedonic contexts, or when business mixes with pleasure. In addition, it is important to study further to learn how consumers handle these risks. Will they choose reputation, price, aroma, popularity, dcor, cuisine style, or some other cue to manage these social risks?

5.1 Limitations of the research

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This study has limitations as the sample was a convenience sample in the USA group and the China group. The China group was more homogeneous and further sampling from other groups of students from other campuses could determine the generalizability of the findings for the China group. For the USA group, the group was more diverse, older, more educated, and more experienced so the comparison was not ideal. Future studies would need to obtain a more comparable USA sample counterpart. Sample size could be increased in future studies. In addition, the items for the questionnaire could be improved to test in a more uniform fashion. Additional items could be identified to add to the questionnaire to capture more likely scenarios. References: Bettman, J.R. (1973) Perceived Risk and Its Components: A Model and Empirical Test. Journal of Marketing Research, Vol. 10, P. 184. Cateora, P.R., Graham, J.L. (1999) International Marketing, 10th Edition. Irwin/McGraw-Hill. Cox, D. F., Rich, Stuart U. (November 1964) Perceived Risk and Consumer Decision-Making The Case of Telephone Shopping. Journal of Marketing Research, Vol. 1, p. 32. Dubois,B., Czellar, S., Laurent, G. (2005) Consumer Segments Based on Attitudes Toward Luxury: Empirical Evidence from Twenty Countries. Marketing Letters, Vol. 16, 2, p.115. Goodman, A. (2005) Consumers Attitudes to Risk. Consumer Policy Review, Vol. 15, 4, p. 147. Hirschman, E.C., Holbrook, M.B. (1982) Hedonic Consumption: Emerging Concepts, Methods, and Propositions. Journal of Marketing. Vol. 46, p.92. Hofstede, G. (2001) Culture's Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Sage Publications. Holbrook, M.B., Hirschman, E.C. ( September 1982) The Experiential Aspects of Consumption: Consumer Fantasies, Feelings, and Fun. Journal of Consumer Research, Vol. 9, p.132. House, R. et al (2004). Culture, Leadership, and Organizations: The GLOBE study of 62 Societies. Sage Publications. Hsee, C.K., Weber, E.U. (1997) A Fundamental Prediction Error: Self-Others Discrepancies in Risk Preference. Journal of Experimental Psychology. Vol. 126, 1, p.45.

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Hsee, C.K., Weber, E.U. (1999) Cross-National Differences in Risk Preference and Lay Predictions. Journal of Behavioral Decision Making, Vol. 12, p. 165. Hsee, C.K., Rottenstreich, Y. (2004) Music, Pandas, and Muggers: On the Affective Psychology of Value. Vol. 133, 1, p. 23. Kahneman, D., Tversky, A. (1979) Prospect Theory: An Analysis of Decision under Risk. Econometrica, Vol. 47, 2, p. 263. Kotler, P. (2003) Marketing Management, 11 Edition. Prentice Hall. Kotler, P., Ang, S.H., Leong, S.M., Tan, C.T. (1999) Marketing Management: An Asian Perspective, 2nd Edition. Prentice Hall Singapore. Loewenstein, G.F., Weber, E.U., Hsee, C.K., Welch, N. (2001) Risk As Feelings. Psychological Bulletin, Vol. 127, 2, p.267. Markus, H.R., Kitayama, S. (1991) Culture and the Self: Implications for Cognition, Emotion, and Motivation. Psychological Review, Vol. 1991, Vol. 98, 2, p.224. Matsumoto, D. (1989) Cultural Influences on the Perception of Emotion. Journal of CrossCultural Psychology, Vol. 20, 1, p. 92. Mitchell, V.W., Greatorex, M. (1988) Consumer Risk Perception in the UK Wine Market. European Journal of Marketing, Vol. 22, 9, p.5. Morris, M.W., Peng, K.P. (1994) Culture and Cause: American and Chinese Attributions for Social and Physical Events. Journal of Personality and Social Psychology, Vol. 67, 6, p.949. Munusamy, V.P., Valdez, M.E., Lo, K.D., Budde, A.E.K., Suarez, C., Doktor, R.H. (2006) The Convergence Theory: Evidence from Hofstede and GLOBE Studies. University of Hawaii working paper presented in at poster board session at the Academy of Management Meeting 2006, Atlanta, GA. Triandis, H.C. (1989) The Self and Social Behavior in Differing Cultural Contexts. Psychological Review, Vol. 96, 3, p.506. Weber, E.U., Hsee, C. K. (1998) Cross-Cultural Differences in Risk Perception, but CrossCultural Similarities in Attitudes towards Perceived Risk. Management Science, Vol. 44, 9, p.1205.

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Weber, E.U., Hsee, C.K., Sokolowska, J. (1998) What Folklore Tells Us about Risk and Risk Taking: Cross-Cultural Comparisons of American, German, and Chinese Proverbs. Organizational Behavior and Human Decision Processes, Vol. 75, 2, p.170. Weber, E.U., Hsee, C.K. (1999) Models and Mosaics: Investigating Cross-Cultural Differences in Risk Perception and Risk Performance. Psychonomic Bulletin & Review, Vol. 6, 4, p. 611. Williamson, O.E. (1985) The Economic Institutions of Capitalism. Free Press.MacMillan, Inc. Williamson, O.E. (2003). Examining economic organization through the lens of contract. Industrial and Corporate Change. Vol. 12, 4, 917. Wong, N.Y., Ahuvia, A. C. (1998) Personal Taste and Family Face: Luxury Consumption in Confucian and Western Societies. Psychology & Marketing, Vol. 12, 5, p.423

Exhibit 1: Bilingual Questionaire

Evaluating Risky Decision Choices and Situations

Thank you for agreeing to take part in this pilot test on examining peoples attitudes towards risk in everyday situations. Instructions to respondent: When considering risk, an individual considers the probability of an uncertain outcome and the consequences of that risk. Consequences could be negative, such as what are chances of passing a class without reading the textbook? What are the chances that I buy the attractive blouse or shirt and it does not fit properly or it looks bad on me? Or they could be positive consequences, such as when people pay $1 for a lottery ticket with the hope that they will win a lot of money. In another example, the garment or accessory attracts compliments or acceptance with regard to a specific reference group, such as your friends.

(Chinese Translation Here of Instructions to respondent) 1

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Risk Explanation Risk and Scale Instructions: Based your perceptions of riskiness, evaluate on a 0 to 10 scale where 0 equals a no risk situation, 1 equals very, very little risk, 2 equals very little risk, 3 equals little risk, 4 equals some risk, 5 equals medium risk, 6 equals high risk, 7 equals very high risk, and 8 equals a very, very high risk situation, and so on. In each of the boxes to the left of the situation, place the number (0-10) that represents your perceptions of risk based on the available information and your feelings. (Put Chinese Translation of Risk and Scale instructions here) 0 0 1 10 2 3 4 5 6 7 8 0 10

Scale

Situation Meeting and shaking hands with your new in-laws. ( ) Choosing a restaurant for a dinner with your good friends. ( ) Drinking California Red table wine with friends. ) ( Choosing a restaurant to eat alone. ) ( Drinking Chinese Red table wine with friends. ) ( Wearing an Italian designer blouse or shirt. ( ) Selecting a bottle of wine to drink with at a restaurant with family. ( ) Buying 2 concert tickets for yourself and your friend to listen to a Chinese Jazz Fusion band. ( ) Wearing a Chinese designer blouse or shirt. ) ( Choosing a restaurant for a business associates dinner. ( ) Meeting and shaking hands with the President of the United States. ( ) Selecting a bottle of wine to drink with friends at a restaurant. ( ) Wearing an American designer blouse or shirt. ) ( Selecting a bottle of wine to drink at a restaurant with a romantic date. ) ( Deciding on a movie to see on Friday with a romantic date. ) ( Riding alone in a taxi without a seatbelt. ( ) Meeting and shaking hands with a homeless person. ( ) Choosing a restaurant for a romantic first date.

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 ) ( Deciding on a movie to see on Friday night with friends. ) ( Crossing a busy downtown street at the corner with traffic lights. ( ) Meeting and shaking hands with your new boss. ) ( Selecting a bottle of wine to drink at a restaurant. ) ( Meeting and shaking hands with the Prime Minister of Great Britain. ( ) Selecting a bottle of wine to drink with family at home. ( ) Buying an international airline ticket for you and your boss. ) ( Riding in your familys car with your family without a seatbelt. ) ( Selecting a bottle of wine to drink at home. ) ( Petting a big black dog. ( ) Buying an international airline ticket for your parents. ( ) Eating a dinner at a Guatemalan Restaurant. ( ) Meeting and shaking hands with your countrys head of state. ( ) Drinking French Red wine with friends. ( ) Deciding on a movie to see on Friday night with family. ) ( Buying 1 concert ticket for yourself to listen to a Chinese Jazz Fusion band. ( ) Buying an international airline ticket for yourself. ) ( Drinking Chinese Red table wine alone. ( ) Crossing a busy downtown street in the middle of the block. ) ( Choosing a restaurant for a dinner with family ) ( Buying an international airline ticket for you and friend. ) ( Deciding on a movie to see alone on Friday night at a theater showing. ( )

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Please complete the following demographic information. 1. Sex: Female Male (Circle one) 2. Age: < 25 years of age 26-35 years old 36-50 years old > 50 years old (Circle one) 25 26-35 36-50 50 3. Highest Education: High School Some College Bachelors Degree Graduate Degree (Circle one) 4. Nationality: U.S.A. Indonesia Thailand Taiwan Hong Kong P.R. China Japan South Korea India Pakistan Zimbabwe South Africa Mexico Other ____________________(Circle One) ____________________ 5. Work Experience: Some part-time experience < 5 years experience 5-10 years experience >10 years experience (Circle one) 5 6-10 10

Exhibit: Control and China Group Sample Demographics USA(n=43) % Frequency Sex Female Male Age <25 Years 25-35 Years 36-50 Years >50 Years Education Some college 32 11 11 28 6 1 3 China (n=54) % Frequency 74.4 94 25.6 120 25.6 214 65.1 0 7.0 2.3 7.0 0 0 168 78.5 21.5 43.9 56.1 100.0

Bachelors degree completed 16 Graduate degree completed Nationality USA China, Taiwan, HK, Korea, Japan India, Pakistan, Thailand, Indonesia Others Work Experience <5 years 5-10 years >10 years 8 33 6 4 3 24 11 21

37.2 46 55.8 0 25.6 0 48.8 214

100.0

7.0

18.6 0 76.7 214 14 9.3 0 0 100.0

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