Ambiguity Aversion
July 4th, 2008Research has shown that we certainly possess risk aversion. Ambiguity aversion should be considered its hidden twin in the proliferate duo that is worth understanding for your business. An awareness of this principle is certainly important enough to add to Paradigms I Follow .
It is simply this: Being psychologically prohibited to expanding decision options because of ambiguity. See, you can have a two or more choices in front of you with greater/lesser/equal worth in the end. You will most likely choose the one which requires the smallest amount of thinking. Please check out the Thirteen.org video that inspired this post. What a neat show! Further:
Frisch and Baron (1988) emphasized that the subjective experience of missing information relevant to a prediction may lead to ambiguity aversion.
Keller
This has so many implications for business and brands. A great example of popular usage and profit from Ambiguity Aversion is the show Deal Or No Deal . Forward to the middle of a show and the decision usually looks like this: Take $300,000 right now, or possibly get $800,000. It’s silly really to choose the $800,000 because the chances are still 1 in 5 or 1 in 10. Since we are averse to ambiguity, it’s easier to calculate “hmmm, I want more money, and this could work”.
This opens up a whole new field of Neuroeconomics to us, which is definitively worth further brain breaching.
Interestingly, ambiguity aversion in pairs of users actually gets worse!
The majority of the dyads exhibited a cautious shift in the face of ambiguity, stating a smaller willingness-to-pay than the two individuals’ average. Our study thus confirms the persistence of ambiguity aversion in a group setting and demonstrates the predominance of cautious shifts for dyads.
Keller
Additional resources:
Four types of Ambiguity Aversion link