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Risk Perception

Tags: risk

Risk is all about perception, as the next story illustrates...

Finally you arrive at your hotel late that night....   The hotel manager has only two rooms left. These two rooms are exactly the same, except for one aspect: The fire alarm.....

The manager tells you that in the event of a nighttime fire due to the usual causes, guests in Room 1, equipped with Alarm 1, have a  2% chance of dying. Guests in Room 2, equipped with Alarm 2, have only a 1% chance of dying.

However - things in life are always complicated -  there's a slight problem.....

According to the manager...... The wiring of Alarm 2 is such that it sometimes causes electrical fires that increase the risk of dying in a nighttime fire by an additional 0.01%.

In other words, Alarm 1 is associated with a 2% risk of death and Alarm 2 is associated with a 1% + 0.01% (betrayal) risk of death.

What room do you choose?

According to a study by Gershoff and Koehler, most participants choose the room with Alarm 1. This,  even though this room 1 has double the increased risk of fire death. Reason: most participants found the tiny risk of "betrayal" (product malfunction) much more frightening than the much larger risk of actually dying.  When people get upset by a tiny risk, they often paradoxically choose the much larger risk.

Personally I think a more imaginable risk 'weighs' stronger than a non-specific abstract risk......

This simple example proofs that perception or emotion has a strong influence on risk decisions.

Next time you have to make a decision on risk, try to make a rational guess. Than, act on this calculated guess and not on your 'risk feeling'.
Nevertheless, keep in mind 'risk decisions' are often irrational, no matter how strong you prove that they are not. It seems we have to live with the fact that, regarding risk, we're all victim of the same emotional bias....

Read more about this interesting subject on:

- Vaccination and betrayal aversion (2011)
- Safety First? The Role of Emotion in Safety Product Betrayal Aversion (2011)
- The Risk-as-feelings hypothesis in a Theory-of-planned-behaviour
- Behavioral economics: the missing link in the financial crisis-  
- Decisions are Never Emotional 
- Irrational Risk

This post first appeared on Selfbetterment, please read the originial post: here

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Risk Perception


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