The Denominator Blindness Effect: Accident Frequencies and the Misjudgment of Recklessness

Viscusi, W. Kip; Zeckhauser, Richard J.

doi:10.2139/ssrn.357160

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The Denominator Blindness Effect: Accident Frequencies and the Misjudgment of Recklessness

40 Pages Posted: 3 Dec 2002

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: October 2002

Abstract

People seriously misjudge accident risks because they routinely neglect relevant information about exposure. Such risk judgments affect both personal and public policy decisions, e.g., choice of a transport mode, but also play a vital role in legal determinations, such as assessments of recklessness. Experimental evidence for a sample of 422 jury-eligible adults indicates that people incorporate information on the number of accidents, which is the numerator of the risk frequency calculation. However, they appear blind to information on exposure, such as the scale of a firm's operations, which is the risk frequency denominator. Hence, the actual observed accident frequency of accidents/exposure is not influential.

JEL Classification: K41, K13, K00

Suggested Citation: Suggested Citation

Viscusi, W. Kip and Zeckhauser, Richard J., The Denominator Blindness Effect: Accident Frequencies and the Misjudgment of Recklessness (October 2002). Available at SSRN: https://ssrn.com/abstract=357160 or http://dx.doi.org/10.2139/ssrn.357160