Watch for
Avoiding options simply because their odds are not precisely specified.
Decision & ChoiceBias #85
Ambiguity Aversion
We prefer known risks over unknown probabilities.
The tendency to prefer options with known probabilities over options where the probabilities are unknown or ambiguous even when the ambiguous option may offer better expected value.
Why it matters: Demonstrated in the Ellsberg Paradox. Foundational in behavioural economics.
Try this
Estimate the range of possible outcomes for ambiguous options rather than treating them as unquantifiable.
Real-world example
Choosing a stock with a known 5% return over one with an unknown but potentially higher return range.
Key researchers
Daniel Ellsberg
First described in 1961
Psychological mechanism
Ambiguity triggers threat response. Unknown probabilities activate the amygdala creating a visceral aversion. Known probabilities even if unfavourable feel more controllable and less anxiety-provoking.
Seminal research
Daniel Ellsberg (1961), "Risk ambiguity and the Savage axioms."
Related Biases
Debrief
Biases are not character flaws. They are recurring patterns in how minds compress uncertainty, save energy, and narrate reality. Once you recognise the pattern, you can slow the decision down, test the assumption, and make space for a better explanation.
Sources
Original ResearchEllsberg (1961) — Original paradox
EducationalAPA Dictionary entry