“Extending the Time Horizon: Elevating Concern for Rare Events by Communicating Losses Over a Longer Period of Time” (with Michael Hand and Howard Kunreuther), Under review at Organizational Behavior and Human Decision Processes. [working paper available here]
Companies and individuals tend to underprepare for rare, catastrophic events because they ignore small probabilities and fail to appreciate how risk accumulates. To address this, we present a novel risk communication strategy: “extending the time horizon,” i.e., presenting the cumulative probability of loss across time (e.g., a 26% chance of flood over 30 years instead of 1% per year). Across three experiments in different contexts, we investigated the effectiveness of this intervention on motivating protective action. Extending the time horizon led participants to perceive greater risk and increased the likelihood they would opt for a small, but sure loss over the small possibility of a large loss. This behavior was robust to time and experiencing a loss. We also found that extending the time horizon made participants sensitive to smaller probabilities. Taken together, this simple intervention counters misperceptions of risk people have regarding rare events, and effectively motivates protective behavior.