Special Session Summary Hide Or Seek: Factors Influencing Ambiguity Aversion Versus Ambiguity Preference

Citation:

Patricia M. West and Susan M. Broniarczyk (1997) ,"Special Session Summary Hide Or Seek: Factors Influencing Ambiguity Aversion Versus Ambiguity Preference", in NA - Advances in Consumer Research Volume 24, eds. Merrie Brucks and Deborah J. MacInnis, Provo, UT : Association for Consumer Research, Pages: 123-124.

Advances in Consumer Research Volume 24, 1997      Pages 123-124

SPECIAL SESSION SUMMARY

HIDE OR SEEK: FACTORS INFLUENCING AMBIGUITY AVERSION VERSUS AMBIGUITY PREFERENCE

Patricia M. West, University of Texas at Austin

Susan M. Broniarczyk, University of Texas at Austin

Ambiguity arises from having scanty, unreliable or conflicting information about the outcome of events, and gives rise to one’s expected value of decision alternatives and degree of "confidence" in choice (Ellsberg 1961). Preference for certain probabilities over vague or uncertain probabilities, ambiguity aversion, has been demonstrated in many experiments using variations of Ellsberg’s gambling task.

Camerer and Weber (1992) recently reviewed the research on ambiguity across multiple disciplines and conclude "uncertainty about the composition of an urn of balls is just one kind of missing information. Feeling ignorant about football or politics, having doubts about which of several experts is right, wondering whether your child has a predisposition to the side effects of a vaccine, or being unsure about another country’s economy are all manifestations of missing information" (p. 360). Recently, there has been a sprinkling of evidence that in some real-world contexts, consumers may in fact seek ambiguity (Kahn and Sarin 1988).

The focus of this session is to examine various factors influencing consumers’ attitude toward ambiguity and when they will display ambiguity seeking versus ambiguity aversion. Each of the three papers presented highlight different factors that effect how consumers respond to ambiguity in real-world decisions that step beyond the traditional balls and urn gambling task. Consumer reaction to ambiguity in the form of unfamiliar or new product decision environments, and environments where expert opinions conflict on product quality were examined. The impact of ambiguity on consumer judgment and decision making has important implications for marketers, managers, and public policy makers alike.

Rather than characterizing individuals’ as having an inherent "preference" for, or "aversion" to ambiguity a richer undersanding is beginning to emerge that isolates a variety of factors that influence consumer response to ambiguity/uncertainty. The papers and panel members have identified several underlying variables related to the decision maker, product category, and situation that inspire either conservatism (ambiguity aversion) or optimism (ambiguity seeking). In particular, consumer knowledge, prior opinions, and the perceived risk associated with the decision are shown to influence consumer response to ambiguous alternatives.

Kimberly A. Taylor and Barbara E. Kahn as well as Craig R. Fox follow up on the recent observation of Heath and Tversky (1991) that consumer knowledge is an important factor in determining tolerance for ambiguity. In particular, people are more willing to bet on their uncertain beliefs when they feel particularly knowledgeable about an area, and prefer to bet on known probabilities when they do not. Kimberly A. Taylor and Barbara E. Kahn find that domain knowledge interacts with accountability and perceived control of a decision outcome to stimulate ambiguity seeking. Craig R. Fox finds that effects associated with domain knowledge disappear when people are asked to evaluate either an ambiguous or an unambiguous alternative in isolation (a noncomparative context) rather both alternatives together (a comparative context). He also finds that willingness to act is influenced by the decision maker’s relative knowledge of other items evaluated in the same context and by the order in which items are evaluated.

Kimberly A. Taylor and Barbara E. Kahn argue that ambiguity seeking is more prevalent with high knowledge individuals because they perceive lower risk associated with the ambiguous outcomes, and enjoy the psychological rewards associated with taking credit for successful choices. Patricia M. West and Susan M. Broniarczyk carefully examine the interplay between perceived risk associated with a product and conflicting information about product quality. Their results indicate that as the perceived risk associated with a decision outcome increases, consumers respond more favorably to product alternatives where there are differing opinions as opposed to consensus regarding product quality. A reference-dependent model is proposed to explain how and when consumers will exhibit ambiguity seeking versus ambiguity aversion when evaluating product alternatives.

Ambiguity has been characterized in many ways ranging from second order to probability to conflicting or missing information. The collection of papers presented in this session spans this range. Patricia M. West and Susan M. Broniarczyk operationalize ambiguity as the variance in response between three critic ratings of a given alternative, Craig R. Fox uses the degree of familiarity with the events on which outcomes depend to distinguish an ambiguous from an unambiguous option, and Kimberly A. Taylor and Barbara E. Kahn use a new product scenario where ambiguity is manipulated by offering claims and historical data on an existing product versus claims but no historical data for a new product.

 

AMBIGUITY AVERSION AND CONTEXT

Craig R. Fox

Willingness to act under uncertainty depends not only on the degree of uncertainty but also on its source, as illustrated by Ellsberg’s observation of ambiguity aversion. Specifically, people prefer to bet in areas in which they feel knowledgeable or competent rather than areas in which they feel ignorant or incompetent. A series of studies suggests that this feeling of confidence or vulnerability underlying source preferences depends crucially on the context of a decision. Source preferences seem to disappear in the absence of a direct comparison between items. Moreover, absolute willingness to act can be diminished or enhanced, respectively, by having a person evaluate more or less familiar items in the same context. Putting these effects together, absolute willingness to act is influenced by the order in which items are presented.

 

KNOWLEDGE, CONTROL, ACCOUNTABILITY, AND DECISION FRAME AS DETERMINANTS OF CONSUMER AMBIGUITY SEEKING

Kimberly A. Taylor and Barbara E. Kahn

Many consumer decisions are made in ambiguous contexts, such as when one buys a new product or adopts an innovation. At best, in such situations, consumers may develop subjective probability estimates of the likelihoods of the various outcomes. In this research, we attempt to provide a comprehensive road map exploring under what circumstances ambiguity would be tolerated, or even preferred. In a series of laboratory experiments, the effects of consumer knowledge, perceived control, and accountability on ambiguous decisions are explored. Further, how these factors are affected by whether the decision is framed as a gain or a loss is also examined.

 

INTEGRATING MULTIPLE CRITIC OPINIONS: THE ROLE OF ASPIRATION LEVEL ON CONSUMER RESPONSE TO CRITIC CONSENSUS

Patricia M. West and Susan M. Broniarczyk

Two studies examine the process by which consumers integrate critic opinions and attribute information in their product evaluations and how critic consensus affects this process. A reference-dependent model is proposed such that consumer response to critic consensus depends on whether the average critic rating for an alternative is above or below an aspiration level. Critic consensus is shown to be preferred for alternatives above an aspiration level whereas critic disagreement is preferred for alternatives below an aspiration level. Consumers exhibited a tendency to prefer critic disagreement for high priced products or decisions associated with high social risk because most alternatives fell below their high aspiration levels. Additionally, critic opinions appeared to be used as an initial screening mechanism for evaluating product alternatives with attribute information only given serious consideration for alternatives evaluated favorably by the critics.

 

DISCUSSION

Colin Camerer

Colin Camerer pointed out the importance of understanding the interaction between situational ambiguity (i.e., missing or conflicting information) and personal preference (i.e., the utility derived from a decision outcome). In particular, while ambiguity seeking is expected when the situation allows a decision maker to take credit for good outcomes, ambiguity aversion is expected to prevail when the decision maker is likely to be blamed for bad outcomes. This observation suggests that the impact of credit versus blame on a consumer’s decision outcome needs to be directly incorporated into the utility assessment process.

While a number of important variables that affect consumer response to ambiguity were considered in the three talks (e.g. the reference point adopted and knowledge of the decision maker, degree of control or accountability associated with the decision outcome, and the amount of information that is missing), Colin suggested others that should be considered in future research on the topic. These additional variables include: (1) preference for information; (2) time pressure; (3) the stakes associated with the decision; and (4) the effect of dyadic relationships.

REFERENCES

Camerer, Colin and Martin Weber (1992), "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, 5, 325-370.

Ellsberg, Daniel (1961), "Risk, Ambiguity and the Savage Axioms," Quarterly Journal of Economics, 75, 643-669.

Heath, Chip and Amos Tversky (1991), "Preference and Belief: Ambiguity and Competence in Choice Under Uncertainty," Journal of Risk and Uncertainty, 4, 5-28.

Kahn, Barbara E. and Rakesh K. Sarin (1988), "Modeling Ambiguity in Decisions Under Uncertainty," Journal of Consumer Research, 15 (September), 265-272.

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