Biology of Business

Concept · Cognitive Bias: Decision-making and judgment biases

Ambiguity effect

Origin: Ellsberg, 1961

By Alex Denne

Biological Parallel

Given a choice between a known berry patch (30% of bushes have fruit) and an unfamiliar patch (unknown fruiting rate), animals prefer the known patch even if the unknown might be better. Norway rats exhibit extreme neophobia toward novel foods—they sample tiny amounts from familiar food sources rather than risk unknown items, even when starving, because novel foods could be poisonous with unknown probability. Common ravens approach familiar food caches preferentially over novel caches of equal quality, as unfamiliar locations carry unknown predation risk and competitor presence. Crows avoid foraging in unfamiliar urban areas despite visible food abundance, preferring established territories with known escape routes and threat patterns. Ambiguity signals unknown dangers—unfamiliar patches could harbor predators, toxins, or competitors. The ambiguity effect is informational risk aversion: known probabilities permit preparation; unknown probabilities mean uncontrolled exposure. Better the devil you know.