Send station · the claim, dispatched
Ostrich Effect
People avoid seeking information that they expect will be psychologically painful or threatening, preferring ignorance over confronting potentially negative realities.
Supports
The bias files watch for people who stop checking their bank/investment accounts when markets fall as confirmation.
Selective attention to portfolio information
Investors logged into their accounts significantly less frequently in falling and flat markets than in rising markets
n≈200000
Liquidity premium and the ostrich effect
The yield difference between liquid T-bills and illiquid deposits was higher in periods of greater uncertainty
qual.
Simplified stock market ostrich effect
Subjects exhibited status quo bias
qual.
Refutes / corrects
— none filed
In the wild
Investor portfolio monitoring during market downturns
Karlsson et al
2009
Enron and WorldCom accounting scandals
During the Enron and WorldCom scandals
2001-2002
Climate change information avoidance
Research on climate change communication has found that when people feel unknowledgeable about an issue and the problem…
2019
Dispatch log · replication robust. The core finding has been replicated across multiple large-scale financial datasets (Swedish, American, and Israeli markets), an experimental asset market (Brown & Kagel, 2009), and extended to health information avoidance, academic feedback seeking, and climate change information processing. The effect sizes are substantial and consistent across methodologies.
Pressure diagram · why it sorts this way
Karlsson, Loewenstein, and Seppi (2009) proposed a formal model where information acquisition decisions are linked to hedonic utility. Acquiring and attending to information has three effects: (1) an 'impact effect' where definitive knowledge has greater psychological impact than suspicion; (2) a 'reference-point updating effect' where attention accelerates adjustment of one's utility reference point; and (3) a 'risk aversion effect' where attention affects the location of the reference point along the utility curve. Given plausible parameter values, the model predicts asymmetric preferences for uncertainty resolution: people seek information after good news but avoid it after bad or ambiguous news.
Manual override
Automate information delivery so avoidance requires active effort rather than passive neglect, and reframe information as decision-useful rather than evaluative.
Karlsson et al. (2009) note that making information acquisition automatic (e.g., automatic portfolio updates) or reframing information as instrumental to goals rather than as ego-threatening feedback can reduce avoidance. Webb et al. (2013) found that reminding people of long-term goals reduced the ostrich problem.
Adjacent stations
- Selective ExposureThe ostrich effect is a specific form of selective exposure, where people selectively avoid information that might cause psychological discomfort.
- Myopic Loss AversionBoth involve emotional reactions to financial information; myopic loss aversion predicts that frequent information monitoring reduces risk-taking, while the ostrich effect predicts selective avoidance of information.
- Information AvoidanceInformation avoidance is the broader construct; the ostrich effect specifically refers to the avoidance of negative information due to anticipated psychological discomfort.