This is a Lexicon entry: the mechanism, when it shows up, and the countermeasure. The full correction, with real-world cases and the audit prompt, hasn't been written yet.
Definition
Primary concept: Loss Aversion. Ambiguity Aversion is Loss Aversion extended to unknown probabilities - known bad outcomes preferred over unknown ones.
When it shows up
Choosing between an option with known probabilities and one with unknown probabilities of similar expected value. Investment choices between familiar and novel assets. Medical decisions where one path has better data than another. Modern context: An investor passes on a high-expected-value opportunity in an emerging market because the probability distribution of outcomes is unknown - and takes a lower-expected-value position in an established market where the distribution is well-characterised. The preference for known over unknown risk overrides the expected value calculation.
Failure mode
The unknown probability is treated as worse than the worst known probability. You take a demonstrably inferior bet because you can calculate its downside, rather than a better bet whose downside you cannot compute.
Countermeasure
Ask: 'Is this genuinely riskier or just less familiar to me?' If you cannot state why the ambiguous option is worse, ambiguity itself is doing the deciding. When correction costs more than the bias: When ambiguity genuinely signals that available information is insufficient to calibrate probabilities accurately - ambiguity aversion may be a rational response to unknown unknowns rather than a bias. Avoid betting on events whose probability distribution is unknown for good reason, not only for psychological ones.
Related traps
Also connected in the map6 more, locked
Credit & first seen
DiscoveredEllsberg, D. (1961).Risk, Ambiguity and the Savage Axioms.Quarterly Journal of Economics 75(4), 643-669 source ↗
Also revealed
Entry #55 of 631 in The Lexicon · see the full Lexicon