What is the term for the preference for a guaranteed outcome over a riskier option, even if the latter has a higher potential payoff?

The preference for a guaranteed outcome over a riskier option, even when the riskier option may offer a higher potential payoff, is known as risk aversion. This concept is rooted in behavioral economics and psychology, where individuals display a tendency to prefer certainty over uncertain outcomes. Risk-averse individuals are often willing to forgo additional gains to avoid potential losses, which can lead to more conservative decision-making in various contexts, such as investing or business strategies.

In organizational behavior, understanding risk aversion is crucial because it influences how people approach challenges and opportunities. For example, a leader who exhibits risk aversion may stick to tried-and-true methods rather than exploring innovative but uncertain initiatives. Recognizing this tendency can help organizations foster an environment that balances caution with the need for growth and innovation.

The other options do not accurately capture this concept. Highsight bias relates to the tendency to see events as having been predictable after they have already occurred, while escalation of commitment refers to the continued investment in a failing course of action. Whistle-blowers are individuals who report unethical practices within an organization. None of these reflect the specific behavior of preferring assured gains over speculative risks, which is the essence of risk aversion.