Decision paralysis

Decision paralysisHow uncertainty affects decisions

Participants in this study were students who had just taken an important exam two weeks before the Christmas holidays

The students had to wait two days to get their results and in the meantime they discovered a discounted holiday to Hawaii they could book for the vacation

Wow – what a great price for a

holiday to Hawaii!

Students were given three options:

A) Buy the holiday today

B) Pass on the holiday today

C) Pay $5 to lock in the price for two days

However two of three groups were told they had either passed or failed the exam thus removing option C

I want to know my exam

result before deciding whether to go to

Hawaii

I’ve passed! Well wouldn’t a

holiday to Hawaii be a great way to celebrate!

I’ve failed. I need a holiday to Hawaii to take my mind off things!

57% of students who were told they had passed their exam chose to go on the holiday (option A)

54% of students who were told they had failed their exam chose to go on the holiday (option A)

However 61% of those who didn’t know whether they had passed or failed, chose to pay $5 to wait two days to get their exam results before deciding (option C)

So if students pass, they want to go on holiday

If they fail, they also want to go on holiday

But if they don’t know whether they’ve passed or failed, they… wait and see before deciding

Conclusion

1. Uncertainty paralyses our ability to make decisions even when the outcome of the uncertainty is irrelevant to the decision we make

Reference

The Disjunction Effect in Choice Under Uncertainty Psychological Science 3 (1992) 305-9 Amos Tversky and Eldar Shafir