Glossary
Ostrich Effect
What is the Ostrich Effect?
The ostrich effect is selective avoidance of information when someone expects unpleasant news. The name comes from the mistaken belief that ostriches bury their heads in the sand to avoid danger. In financial research, it describes reduced attention to account information after indications that markets are doing poorly. Avoidance need not involve believing that ignoring a problem makes it disappear; people may wish to avoid the distress of learning more.
Research
Karlsson, Loewenstein and Seppi (2009) developed a model linking information seeking to the psychological impact of news. In two datasets of Scandinavian and American investors, account monitoring was more frequent in rising markets than in flat or falling markets.
Ostrich effect examples in finance and health
A person delaying a look at a bank statement after overspending is a hypothetical example. Health information can also be unpleasant, but financial monitoring evidence alone does not establish why someone misses a medical appointment or what effect that has on their health. Costs, access, available actions and other circumstances also matter.
Why it matters
Less information seeking is not automatically irrational; the value of information depends on whether and how it can be used.
Before calling avoidance a mistake, ask what the person could do with the information. Avoiding a useful warning is different from skipping an update that changes nothing.