How Close Is Too Close: The Effect of Near Losses on Subsequent Risk Taking

This paper examines how individuals adjust their risk taking in response to close calls with undesirable outcomes (near losses) and explores the possible mechanisms, cognitive and emotional, that drive these effects. We present five experiments (N=6,729) that vary people’s proximity to losses and measure the extent of their behavioral adjustment. We find that closeness to undesirable outcomes affects later risk taking: Near misses substantially decrease risk taking, and far misses substantially increase risk taking, relative to no feedback. We further find that these effects persist following a 1-hour delay and are thus not likely to be caused by transient shifts in affect. Finally, we show that closeness to undesirable outcomes leads to changes in estimates of the likelihood of similar outcomes in the future and that this shift explains behavioral adjustment in subsequent risk-taking. We demonstrate these findings in a stylized risk-taking task and a more naturalistic decision-making environment (hypothetical close calls with COVID-19 exposures). Our findings support a cognitive rather than emotional account of near-miss effects.