Probability Neglect

Probability Neglect

Reviewed by Faisal Zaidi

The pattern in which a decision tracks how bad an outcome would be rather than how likely it is.

What it is

In two field surveys of extended warranty buyers, purchases followed the consequence of going uncovered and not the chance of a breakdown. It is drawn from work by Marieke Huysentruyt and Daniel Read (2010).

In effect

In the article on why we buy extended warranties, it is used to describe the survey pattern.

What it does not say

It describes a pattern in survey data on buyers of cover. It does not say that every buyer ignores the chance of a breakdown.

Sources

  1. Huysentruyt, M., & Read, D. (2010). How do people value extended warranties? Evidence from two field surveys. Journal of Risk and Uncertainty, 40(3), 197-218.