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Perceptual accuracy and conflicting effects of certainty on risk-taking behaviour

Author

Listed:
  • Sharoni Shafir

    (B. Triwaks Bee Research Center, Faculty of Agricultural, Food and Environmental Quality Sciences, The Hebrew University of Jerusalem)

  • Taly Reich

    (Max Wertheimer Minerva Center for Cognitive Studies, Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel)

  • Erez Tsur

    (B. Triwaks Bee Research Center, Faculty of Agricultural, Food and Environmental Quality Sciences, The Hebrew University of Jerusalem)

  • Ido Erev

    (Max Wertheimer Minerva Center for Cognitive Studies, Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel)

  • Arnon Lotem

    (Faculty of Life Sciences, Tel-Aviv University)

Abstract

The certainty effect: Experience counts The certainty effect (or Allais paradox) is one of the most important paradoxes in the behavioural and social sciences. It holds that people and even animals tend to select the safer of two prospects, even though it may not be the more rewarding, if this ensures a good outcome with certainty. The effect appears counter-intuitive and its underlying mechanisms are not clear. A set of experiments designed to clarify the situation — using human volunteers rewarded with money and honeybees rewarded with sucrose — is reported in this issue. They provide a simple and novel explanation. The results fit a simple process-based model of matching behaviour capable of explaining the certainty effect in humans and other animals that make repeated decisions based on experience. The certainty effect emerges when it is difficult to discriminate between the different rewards, whereas reversed certainty emerges when discrimination is easy.

Suggested Citation

  • Sharoni Shafir & Taly Reich & Erez Tsur & Ido Erev & Arnon Lotem, 2008. "Perceptual accuracy and conflicting effects of certainty on risk-taking behaviour," Nature, Nature, vol. 453(7197), pages 917-920, June.
    • Handle: RePEc:nat:nature:v:453:y:2008:i:7197:d:10.1038_nature06841
    DOI: 10.1038/nature06841
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    Citations

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    Cited by:

    1. Sibilla Di Guida & Ido Erev & Davide Marchiori, 2014. "Cross Cultural Differences in Decisions from Experience: Evidence from Denmark, Israel and Taiwain," Working Papers ECARES ECARES 2014-16, ULB -- Universite Libre de Bruxelles.
    2. repec:cup:judgdm:v:16:y:2021:i:2:p:267-289 is not listed on IDEAS
    3. Ramirez, Patrick A. & Levine, Daniel S., 2013. "A review of the certainty effect and influence of information processing," Economics Discussion Papers 2013-47, Kiel Institute for the World Economy (IfW Kiel).
    4. Tian, Ye & Li, Yudi & Sun, Jian, 2022. "Stick or carrot for traffic demand management? Evidence from experimental economics," Transportation Research Part A: Policy and Practice, Elsevier, vol. 160(C), pages 235-254.
    5. Di Guida, Sibilla & Erev, Ido & Marchiori, Davide, 2015. "Cross cultural differences in decisions from experience: Evidence from Denmark, Israel, and Taiwan," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 47-58.
    6. Ori Plonsky & Yefim Roth & Ido Erev, 2021. "Underweighting of rare events in social interactions and its implications to the design of voluntary health applications," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(2), pages 267-289, March.
    7. Khalil, Elias L., 2015. "Temptations as Impulsivity: How far are Regret and the Allais Paradox from Shoplifting?," Economic Modelling, Elsevier, vol. 51(C), pages 551-559.

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