The impact of the ambiguity effect on decision-making
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The ambiguity effect
Research shows that when we have to decide between two possible outcomes, one with a known probability and one with an unknown probability, we tend to choose the option with the known probability.
We skip over the difficult part of making estimates or guesses about the ambiguous option and opt instead for the familiar outcome.
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The impact of the ambiguity effect
The ambiguity effect influences our shopping habits. Research shows that people tend to choose products and services from well-known brands because they think that known brands have better quality products.
The buyer faces three potential consequences:
- They choose a mediocre product where an unknown brand may have better quality.
- They lose money by spending it on more expensive brand-name products.
- They miss out on buying a product that will meet their needs.
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Different tolerance levels for ambiguity
People have different tolerance levels for ambiguity - the tendency to view ambiguous circumstances as desirable.
- Those with a low tolerance for ambiguity tend to see the unknown as bad or threatening.
- Individuals with a high tolerance for ambiguity tend to view uncertain situations as a challenge and an opportunity for problem-solving.
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How to overcome the ambiguity effect
Self-reflection can help you to see where you are on the spectrum of ambiguity. Think of a time when you had to decide with limited information. How did you address it? How did you feel while trying to make a choice? Which option did you choose?
If you have low levels of tolerance for ambiguity:
- Practice mindfulness. Be aware of your emotions.
- Make time to think about the decisions you need to make.
- Embrace creative solutions instead of getting stuck in fear.
- Articulate what you want the outcome to be.
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