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Journal articles (2019), Management Science, 66 (8)

The Future Ambiguity Effect : How Narrow Payoff Ranges Increase Future Payoff Appeal

LIU Y., HEALTH T., ÖNCÜLER Ayse

Increasing a current payoff’s ambiguity from a precise value (e.g., $150) to a range (e.g., $140-$160) generally reduces the payoff’s appeal, as does delaying the payoff from, for example, now to one year from now. However, we report five studies in which adding small ranges to future payoffs increases future payoff appeal, an emergent property designated the future ambiguity effect. This effect generalizes across various choice sets, payoff levels, and delays, and prevails even when a future smaller ambiguous payoff is preferred more than a future larger precise payoff. Two underlying processes are proposed and supported: (1) Payoff ambiguity’s explicit risk of receiving a smaller payoff distracts people from the future’s larger implicit risk of receiving nothing, while (2) payoff ambiguity restores some of the excitement lost to the future’s psychological distance. Nonetheless, the future ambiguity effect is not universal, given that larger ranges can reduce and even eliminate it (boundary condition). Link to the article

LIU, Y., HEALTH, T. and ÖNCÜLER, A. (2019). The Future Ambiguity Effect : How Narrow Payoff Ranges Increase Future Payoff Appeal. Management Science, 66(8).