Advertisement

(Ad Space)

Browse & Filter Biases

Showing 187 biases.

Need To Act Fast

We favor simple–looking options and complete information over complex, ambiguous options

Ambiguity bias

Description

A cognitive bias where decision making is affected by a lack of information, or "ambiguity". People tend to select options for which the probability of a favorable outcome is known, over an option for which the probability of a favorable outcome is unknown.

Example 1:

An investor chooses a fund with a clear, though modest, track record over a new fund with potentially higher returns but less historical data, due to the uncertainty of the latter.

Example 2:

When choosing between two investment strategies, one with well-documented historical returns and risks, and another newer strategy with potentially higher returns but less data, investors often prefer the known option.

Advertisement

(Ad Space)