Journal
PSYCHONOMIC BULLETIN & REVIEW
Volume -, Issue -, Pages -Publisher
SPRINGER
DOI: 10.3758/s13423-023-02415-x
Keywords
Rare outcomes; Risky choice; Decisions-from-experience; Extreme outcomes; Sampling models
Categories
Ask authors/readers for more resources
This study examines the impact of the combination of rarity and extremity biases on decision-making. It finds that when events are both rare and extreme, people's risk preferences shift.
Many real-world decisions involving rare events also involve extreme outcomes. Despite this confluence, decisions-from-experience research has only examined the impact of rarity and extremity in isolation. With rare events, people typically choose as if they underestimate the probability of a rare outcome happening. Separately, people typically overestimate the probability of an extreme outcome happening. Here, for the first time, we examine the confluence of these two biases in decisions-from-experience. In a between-groups behavioural experiment, we examine people's risk preferences for rare extreme outcomes and for rare non-extreme outcomes. When outcomes are both rare and extreme, people's risk preferences shift away from traditional risk patterns for rare events: they show reduced underweighting for events that are both rare and extreme. We simulate these results using a small-sample model of decision-making that accounts for both the underweighting of rare events and the overweighting of extreme events. These separable influences on risk preferences suggest that to understand real-world risk for rare events we must also consider the extremity of the outcomes.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available