Rare disaster information can increase risk-taking

Abstract

The recent increase in the frequency and impact of natural disasters 1 highlights the need to provide the public with accurate information concerning disaster prevalence. Most approaches to this problem assume that providing summaries of the nature and scale of disasters will lead people to reduce their exposure to risk 2 . Here we present experimental evidence that such ex post 'news reports' of disaster occurrences can increase the tolerance for risk-taking (which implies that rare events are underweighted 3 ). This result is robust across several hundred rounds of choices in a simulated microworld, persists even when the long-run expected value of risky choices is substantially lower than safe choices, and is contingent on providing risk information about disasters that have been (personally) experienced and those that have been avoided ('forgone' outcomes). The results suggest that augmenting personal experience with information summaries of the number of adverse events (for example, storms, floods) in di erent regions may, paradoxically, increase the appeal of a disaster-prone region. This finding implies a need to communicate long-term trends in severe climatic events, thereby reinforcing the accumulation of events, and the increase in their associated risks, across time 4 .For the past 20 years Munich Re have surveyed the previous year's natural catastrophes. Their most recent report 1 states: 'It is not just that the number of natural catastrophes studied over the decades has increased . . . as a result of climate change, but that the impact of these events (as anticipated) has also become much greater and more costly' . Thus, although climate change is gradual, its impact on communities is not only incremental and chronic but can also be sudden and acute because climate change alters the prevalence and severity of discrete climate-related negative events (for example, storms, floods, crop failures) 5 . This fact underscores the importance of understanding how people react to information about the risk of natural catastrophes.A common response to this communication problem is to assume that more information is better, and that providing descriptive summaries of risk levels will lead people to reduce their exposure to relevant risks. This approach is taken in many fields; examples include information about vehicle accidents in a given area 6-8 , the risk of forest fire 9 , flood risks 10 , and terrorist attacks (for example, the US Traveler Enrollment Program).Although evaluations of the response to these systems are scarce 8,9 , the hoped-for positive effect of summarized information does not always materialize. Several studies suggest that publicly available information summaries concerning catastrophic events sometimes have the paradoxical effect of decreasing overall risk estimates 11-13 . For example, in a study of residents living in an area close to, but unaffected by the 2011 Tohoku tsunami 13 , participants were presented with scenarios involving waves of varying heights and asked whether each req...

The dynamics of choice in a changing world: Effects of full and partial feedback

“…This finding replicates those of Newell et al (2016), who found that with a higher level of information, participants became less risk-averse than with lower levels. The reason for this difference will become clearer when we explore the dynamics of choice in the two conditions, to which we turn now.…”

“…This case of repeated choice with full feedback has been also studied extensively (e.g., Avrahami et al, 2014;Yechiam & Busemeyer, 2006). Some work has indeed compared behavior under full-and partial feedback (e.g., Camilleri & Newell, 2011;Grosskopf et al, 2006;Newell, Rakow, Yechiam, & Sambur, 2016;Rakow, Newell, & Wright, 2015). However, these previous studies focused mainly on the question whether decision makers maximize their profit given either of the two feedback regimes or to what degree decision makers underweigh small probabilities with these feedback regimes.…”

Variability in Decision Strategies Across Description‐based and Experience‐based Decision Making

“…First, this study investigated the description‐based and experience‐based decision making outside of canonical binary gambles, which have been extensively used in previous studies (Rakow & Newell, ). Even though there are numerous studies investigating experience‐based decisions using multiple alternative–multiple outcome tasks, they were either heavily focused on binary outcome gambles with multiple alternatives or binary alternative gambles with multiple outcomes, or they did not directly compare preferences between experience‐based and description‐based formats (Hills et al, ; Newell, Rakow, Yechiam, & Sambur, ; Noguchi & Hills, ; Teodorescu & Erev, ; Wulff, Hills, & Hertwig, ; Yechiam, Rakow, & Newell, ). Here, we examined risk preferences in description‐based and experience‐based decision making using a three‐outcome mixed gamble task and using a within‐subject design to directly compare different decision strategies across the two presentation formats.…”

Fatalism, Causal Reasoning, and Natural Hazards

“…Research has also examined framing in relation to different descriptions of lowfrequency risks, such as earthquakes or motoring fatalities. People generally find it hard to be concerned about such low-frequency risks, and their lack of concern combines with fatalism to hinder voluntary action (Newell, Rakow, Techiam, & Sambur, 2016;Slovic, Fischhoff, & Lichtenstein, 1978). However, if low-frequency risks are framed over a lifetime, such as 50 years, people assess the risk more accurately than when the risk is framed in a short time period or a very long period (Slovic et al, 1978).…”

“…Other research shows that people make more accurate risk judgments when data are framed as natural frequencies rather than probabilities (Budescu, Broomell, & Por, 2009;Gigerenzer & Hoffrage, 1995;Newell et al, 2016). Natural frequencies are based on a representative sample of the population.…”