“It Could Happen for Me … but How Good Can It Be?” Investigating the Relationship between Scarcity Beliefs, Similarity, and Perceived Value

Events occurring to similar people are often more likely to strike us too. People overgeneralize this observation and routinely use their similarity to an affected individual to infer the likelihood of the same event occurring for the self, even when similarity is normatively irrelevant. We show that, when events seem more likely (due to enhanced similarity), their anticipated absolute value is diminished (e.g., bad events seem less bad, and good events seem less good). This is because people rely on scarcity beliefs when predicting the value of unlikely (vs. likely) outcomes: events that seem unlikely seem to have a greater absolute value than events that seem likely. In four studies, we show that increasing perceived similarity to an affected individual inflates the perceived probability that the event will affect the self. These inflated probabilities, in turn, lead people to infer that these events will have a lower absolute value.