Behind the Veil of Ambiguity: Decision-Making under Social and Non-Social Sources of Uncertainty

Abstract

Research has long documented how different forms of uncertainty, namely risk and ambiguity, influence decision making. This literature, however, has given little attention to how decisions may differ in response to the source generating the uncertainty of potential outcomes. Some decisions may be social in nature where the uncertainty is generated by another person, whereas other decisions may be non-social involving uncertainty that is generated by probabilistic mechanisms. While past research has demonstrated the importance of source within the risk domain, our study provides the first exploration of social ambiguity sensitivity. We construct a general measurement of Social Uncertainty Sensitivity and explore how such sensitivity differs across three different uncertainty environments: risk, low ambiguity, high ambiguity. We find strong correlations between Social Uncertainty Sensitivity across levels of ambiguity and risk. Further, using reaction time as a proxy for information processing, we observe a significant relationship between Social Uncertainty Sensitivity and reaction time in decisions to invest (as opposed to not investing) in a given uncertainty environment. Our results demonstrate that not only is it important to consider the type of uncertainty environment on decision making, but that decisions are also shaped by individual sensitivity to how the uncertainty is derived.