Same Interdependent Risk, Different Valuation: How Risk Representation Shapes Ecosystem Investment Decisions

Why do decision makers value the same risky opportunity differently when the underlying probability of success is unchanged? We study this question in ecosystem investment decisions, where success requires that none of the critical components fail, causing component risks to compound. We conducted a high-powered preregistered replication and extension of Adner and Feiler's key study (N = 3,600). Participants valued a $100,000 opportunity that required six independent components to succeed, each with a 75% chance of success, yielding an overall success probability of ≈18%. Replicating prior work, participants reported higher confidence and assigned higher valuations when they first saw the component probabilities and then the aggregate probability than when they saw only the aggregate probability. We then tested two ways to make interdependent risk easier to reckon with: presenting chances as frequencies (e.g., “75 out of 100”) and framing the chance process as already completed (past) rather than still unfolding (future). Both improved calibration by moving valuations toward the expected value, and together they eliminated the valuation gap. Rather than cautioning only against overinvestment, our results allow us to move beyond the prior focus on optimism bias and illustrate how interventions that change the information environment improve participants’ risk calibration.