Paying for What You'll Like? The Uncertain Value of Uncertainty

Abstract

Risk and uncertainty can be perceived in seemingly contradicting ways. Receiving a surprise gift can be exciting, whereas not knowing the outcome of a job interview can be incredibly anxiety-provoking. Even the same uncertain event, such as gambling, can simultaneously evoke positive and negative emotions. When is uncertainty positive, and when is it negative? We find that how much people value uncertainty depends on the context, and in particular, how value is measured. Namely, when considering pricing measures (e.g., willingness-to-pay), uncertainty is evaluated negatively, whereas when considering rating measures (e.g., enjoyment), uncertainty is evaluated positively. This effect holds when the outcomes are positive or negative, and even when changing the amount of uncertainty, uncertainty remains negative with pricing measures and positive with rating measures. We explore possible explanations, such as perceived selling price of uncertain prospects, and discuss crucial implications for both theory and applications.

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