Super-underweighting of rare events with repeated descriptive summaries

Eldad Yechiam*, Tim Rakow, Ben R. Newell

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)67-75
Number of pages9
JournalJournal of Behavioral Decision Making
Volume28
Issue number1
DOIs
Publication statusPublished - 1 Jan 2015

Keywords

  • Cumulative prospect theory
  • Decision making
  • Experience sampling
  • Fuzzy trace theory
  • Rare events
  • Risk communication
  • Risk preference

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