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Certainty Effect

 

Explanations > Theories > Certainty Effect

Description | Research | Example | So What? | See also | References 

 

Description

When an outcome is certain and it becomes less probable, this has a greater impact than when the outcome was merely probable before the probability was reduced by the same amount. Thus 100% - 10% = 90% has more psychological impact than 50% - 10% = 40%.

There is also a pseudo-certainty effect, where the certainty is only perceived.

Overall, this works because of our preference for absolutes and our inability to really understand the meaning of the difference between different probabilities. To most people, 70%, 80% and 90% all mean the same: not certain, but fairly likely. Thus we would rather eliminate risk rather than reduce it.

Research

Kahneman and Tversky (1979) asked students to evaluate insurance costing only 50% of normal, but which would only pay out in 50% of cases (though their premium would be refunded if they did not get the payout). 80% of students chose to refuse the insurance. 

Example

Most people would pay more to remove the only bullet in the gun in a game of Russian Roulette than they would to remove one bullet when there were four in the gun.

So what?

Using it

Instead of offering four for the price of three, offer one free with three purchased. The zero price has greater certainty.

Defending

Beware of making decisions based on absolutes. Distinguish the real difference between 80% and 90%.

See also

Prospect Theory

References

Tversky and Kahneman (1981)

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