Why do we seek certainty in risky situations?

Zero Risk Bias

, explained.
Bias

What is the Zero Risk Bias?

Zero risk bias relates to our preference for absolute certainty. We tend to opt for situations where we can completely eliminate risk, seeking solace in the figure of 0%, over alternatives that may actually offer greater risk reduction.

Where it occurs

Have you ever bought an insurance policy for something that you felt was close to impossible? We know that these hypotheticals are highly unlikely, such as needing surgery in a foreign country, but the thought of such an event can be deeply unsettling. Although the policy might not be worth the premium we pay, part of what we’re buying is the peace of mind in knowing we’ve eliminated the potential risk.

People are not calculators, and most do not consciously deliberate the exact probabilities of events. Instead, they often gauge a prospect by how they feel about it. Even a 1% chance of disaster can loom over our conscience, and eschewing such a minute probability and securing that 0% can be a favorable outcome.

Related Biases

Sources

  1. Aimé, P., & Grünbeck, J. (2019) Smart Persuasion: How Elite Marketers Influence Consumers (and Persuade Them to Take Action). Independently published
  2. Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263. doi:10.2307/1914185
  3. Loewenstein, G. F., Weber, E. U., Hsee, C. K., & Welch, N. (2001). Risk as feelings. Psychological bulletin, 127(2), 267.
  4. Viscusi, W. K., Magat, W. A., & Huber, J. (1987). An investigation of the rationality of consumer valuations of multiple health risks. The RAND journal of economics, 465-479.
  5. Allais, M. (1953). Le comportement de l'homme rationnel devant le risque: critique des postulats et axiomes de l'école américaine. Econometrica: Journal of the Econometric Society, 503-546.
  6. Akçay, Y., Boyacı, T., & Zhang, D. (2013). Selling with money‐back guarantees: The impact on prices, quantities, and retail profitability. Production and Operations Management, 22(4), 777-791.
  7. Schmidt, S. L., & Kernan, J. B. (1985). The many meanings (and implications) of" satisfaction guaranteed.". Journal of Retailing.

About the Authors

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Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

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Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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