Information gaps for risk and ambiguity.

Abstract

We apply a model of preferences about the presence and absence of information to the domain of decision making under risk and ambiguity. An uncertain prospect exposes an individual to 1 or more information gaps, specific unanswered questions that capture attention. Gambling makes these questions more important, attracting more attention to them. To the extent that the uncertainty (or other circumstances) makes these information gaps unpleasant to think about, an individual tends to be averse to risk and ambiguity. Yet in circumstances in which thinking about an information gap is pleasant, an individual may exhibit risk- and ambiguity-seeking. The model provides explanations for source preference regarding uncertainty, the comparative ignorance effect under conditions of ambiguity, aversion to compound risk, and a variety of other phenomena. We present 2 empirical tests of one of the model's novel predictions, which is that people will wager more about events that they enjoy (rather than dislike) thinking about. (PsycInfo Database Record (c) 2020 APA, all rights reserved).