The ambiguity effect leads us to believe that outcomes with the highest known probability are always the best for the business, but that’s not always true. When faced with choices that have uncertain outcomes, our brains tend to rely on mental shortcuts, which can lead to cognitive biases. One of these cognitive biases is called the ambiguity effect
When we avoid options with less information
When faced with deciding between two possible outcomes – one with a known probability and one with an unknown probability – research shows that we tend to choose the option with the known probability
- Our brains skip the hard part of making estimates or guesses about the ambiguous choice and go straight for the more familiar option
- This works because we don’t like to mess around with the unknown, so we avoid it as much as we can
Overcoming the ambiguity effect
Practice mindfulness
- Self-reflection
- Make time to think about decisions
- Get creative
- Develop a clear vision and focus on what you want the outcomes to be
- Don’t get stuck in fear
- Embrace your creativity
The impact of the ambiguity effect
People tend to choose products and services from well-known brands because they believe that familiar brands have better quality products than lesser-known ones
- Since consumers don’t know anything about the unfamiliar brand, they stick with brands they’ve seen before
- This can lead to three outcomes: choosing a mediocre product, losing money, or missing out on income
Tolerance for ambiguity
We all have different tolerance levels for ambiguity. People with a low tolerance for ambiguity tend to view uncertain situations as adverse.
- Youth with anxiety disorders experience more ambiguity than the control group, while those with a high tolerance view ambiguity as a challenge and an opportunity for problem-solving.
