ambiguity effect in psychology

The ambiguity effect is a psychological phenomenon that occurs when people avoid options with uncertain outcomes in favor of options with known outcomes, even if the uncertain option might have a higher expected value. This effect is often seen in decision-making, where people tend to avoid choices with uncertain outcomes, even if those options could lead to greater potential rewards.

One study by Hsee and Weber (1997) demonstrated the ambiguity effect by asking participants to choose between two lotteries. One lottery had a higher probability of winning a smaller prize, while the other lottery had a lower probability of winning a larger prize. When the probabilities were certain, participants tended to choose the lottery with the higher expected value. However, when the probabilities were uncertain, participants tended to avoid the ambiguous option and chose the lottery with the lower expected value but with known probabilities.

The ambiguity effect has been attributed to the fact that people often experience discomfort when they are uncertain about the outcomes of their decisions. As a result, they may avoid uncertain options and choose more familiar options, even if those options have lower expected value.

Overall, the ambiguity effect highlights the importance of understanding how people make decisions in uncertain situations and how they perceive risk and uncertainty.

Reference:

Hsee, C. K., & Weber, E. U. (1997). A fundamental prediction error: Self‐others discrepancies in risk preference. Journal of Experimental Psychology: General, 126(1), 45-53. doi: 10.1037/0096-3445.126.1.45

Geoffrey W. Sutton, PhD is Emeritus Professor of Psychology. He retired from a clinical practice and was credentialed in clinical neuropsychology and psychopharmacology. His website is  www.suttong.com

 

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