Ellsberg Paradox
Version 1.0.0 · Updated 2026-07-31
CORE DEFINITION
A paradox proposed by Daniel Ellsberg, showing that people tend to avoid ambiguity: when given a choice between known and unknown probabilities with the same expected value, they prefer the known probability option.
SCAFFOLDING EFFECT
Reduce cognitive load
Ambiguity management. It explains why transparency and information disclosure are so important in business contexts. In product design or corporate communication, reducing uncertainty can significantly enhance user or investor acceptance.
Anchor fast decisions
In two gambles with identical expected returns, one with known probabilities and one with unknown (ambiguous) probabilities, people systematically prefer the one with known probabilities, i.e., 'ambiguity aversion'. This violates subjective expected utility theory, indicating that people are more averse to 'unknown uncertainty' than to 'known risk'.
MINIMUM ACTION
In progress 0/4Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Ellsberg_paradoxverified
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