Super-underweighting of rare events with repeated descriptive summaries

TY - JOUR

T1 - Super-underweighting of rare events with repeated descriptive summaries

AU - Yechiam, Eldad

AU - Rakow, Tim

AU - Newell, Ben R.

PY - 2015/1/1

Y1 - 2015/1/1

N2 - Field studies suggest that providing summarized information concerning the prevalence of risks can increase risk taking when the hazard is rare. We study a simple experimental model of this phenomenon based on repeated descriptive summaries of past outcomes. Under cumulative prospect theory and experience-sampling models, descriptions of rare events should increase the weighting of rare events. On the other hand, if individuals are sensitive to the frequency of events, then event summaries are expected to accentuate the underweighting of rare events despite adding descriptive information. These contrasting predictions were examined in three experiments using a multi-alternative decision task with two sets of options: safe and risky. In all three experiments, repeated descriptive summaries of past outcomes from all alternatives or from a randomly drawn alternative were found to accentuate the underweighting of rare events by a similar amount. The results shed light on the role of frequency-based judgments in the extreme underweighting of rare events and highlight that providing information about the incidence of rare hazards can have the unintended effect of increasing, rather than decreasing, people's propensity to take risks.

AB - Field studies suggest that providing summarized information concerning the prevalence of risks can increase risk taking when the hazard is rare. We study a simple experimental model of this phenomenon based on repeated descriptive summaries of past outcomes. Under cumulative prospect theory and experience-sampling models, descriptions of rare events should increase the weighting of rare events. On the other hand, if individuals are sensitive to the frequency of events, then event summaries are expected to accentuate the underweighting of rare events despite adding descriptive information. These contrasting predictions were examined in three experiments using a multi-alternative decision task with two sets of options: safe and risky. In all three experiments, repeated descriptive summaries of past outcomes from all alternatives or from a randomly drawn alternative were found to accentuate the underweighting of rare events by a similar amount. The results shed light on the role of frequency-based judgments in the extreme underweighting of rare events and highlight that providing information about the incidence of rare hazards can have the unintended effect of increasing, rather than decreasing, people's propensity to take risks.

KW - Cumulative prospect theory

KW - Decision making

KW - Experience sampling

KW - Fuzzy trace theory

KW - Rare events

KW - Risk communication

KW - Risk preference

UR - http://www.scopus.com/inward/record.url?scp=84920156175&partnerID=8YFLogxK

U2 - 10.1002/bdm.1829

DO - 10.1002/bdm.1829

M3 - Article

AN - SCOPUS:84920156175

SN - 0894-3257

VL - 28

SP - 67

EP - 75

JO - Journal of Behavioral Decision Making

JF - Journal of Behavioral Decision Making

IS - 1

ER -