Fear of a pandemic. Mistakes in perception and risk-taking in the coronavirus era

The new coronavirus has so far taken over a million lives worldwide. The current pandemic is described as the worst global crisis since World War II. Measures taken by governments and individuals, such as introducing and maintaining a social distance, can slow down the spread of the virus, and thus save lives. However, they result in high psychological and economic costs. Therefore, both governments and individuals face the challenge of making sound judgments and decisions when faced with this disturbing threat. This project aims to examine how the formulation of decision problems as coronavirus-related affects people’s ability and willingness to stick to rational solutions.

Photo by Michał Łepecki

To this end, we ask the participants of the online experiments to answer a series of questions. They are tricky meaning that intuitive answers are incorrect. For example, the respondent may be informed that the result of the coronavirus testing is correct in 95% of cases and asked what is the likelihood that someone who has received a positive result is actually infected. Intuitive answer would be 95%. However, the correct answer depends significantly on the number of infected people in the population: the fewer of them, the higher the percentage of false positive results.

We check whether such deviations from rationality are more frequent or less frequent than in the corresponding more neutral versions, which are less emotionally charged and bring a lower level of uncertainty. Thus, the second group of participants is told that the medical examination of a patient who is suspected of having a common cold gives the correct result in 95% of cases (and answers a similar question). In this case, we are also dealing with a medical context, but a more familiar and less dangerous one. Finally, the third group of respondents answers questions about the risk of unemployment – still a serious context but not directly related to the risk to health and life.

Photo by Michał Łepecki

Interestingly, the existing source literature does not allow to formulate unambiguous predictions as to how the fear of the coronavirus will affect the correctness of risk assessment and decisions made. On the one hand, fear or anxiety may bring more attention, on the other hand, it may cause the decision-maker to focus only on certain aspects of the situation. When making risky decisions, fear tends to make people overemphasise the worst possible outcomes. Such an attitude generally results in risk avoidance, especially if taking the risk can lead to losses compared to the starting point.

Our project has three main objectives. Firstly, we will be able to see how feelings of uncertainty and inadequate information, fear and other emotions influence decision making in pandemic conditions. For example, they can lead to such irrational behaviour as panic buying. Secondly, we will be able to suggest how these deviations from rationality can be corrected. Thirdly, using the unique “natural experiment” of the coronavirus pandemic, we will contribute to the literature on the impact of uncertainty, fear and other emotions on rationality, perception of risk and readiness to take risks in a wider context.

Preliminary results indicate significant differences – between the coronavirus and other contexts – in the correctness of answers to some, but not all, of the tricky questions considered. Overall, participants in the COVID-19 treatment seem to make equally rational choices as those in a less serious medical context (common colds) and more rational than those in a serious but non-medical context (unemployment).

Photo by Michał Łepecki

Dr hab. Michał Krawczyk, Prof. at UW

He received his doctorate in economics from the University of Amsterdam and is currently a professor at the University of Warsaw. His research interests include selected aspects of behavioural economics, in particular those related to decision making under risk and methodology of experiments. He published, among others, in American Economic Review, Behavioural and Brain Sciences, Journal of the European Economic Association, MIS Quarterly.

Date of publication: 18^th Nov 2020