Heuristics/cognitive heuristics (Underadjustment in applied situations…
Underadjustment in applied situations
Forecaster's prediction often too close to last data point and too close to other forecaster's prediction.
Seller's asking price for house, change valuation by 10% (Northcraft & Neale, 1987)
Jurors gave harsher sentences (Greenberg et al., 1986)
Higher bargains produced better outcomes (Siegel & Fouraker, 1960)
Anchoring and adjustment heuristic
Quattrone: absurd anchor and monetary incentive showed same effect. textbook or or less than $7000=?
% African countries in UN
10 > 25% / 65 > 45%
Givolch & Epley 2001
Availability heuristic (Kahneman & Tversky, 1973) 105/152 'k'
suicides vs murder
GBBGBG vs GGGBBB (Tversky & Kahneman, 1983)
Representativeness adaptive? Probability matching 80% red 20% blakc
Milinski (1979) hunter gatherer ancestors, prob matching adaptive. population proportion at a food source would match proportion of food found there e.g. fish
Misperception of randomness (coin toss)
Hot hand (basketball)
Gamblers fallacy - bad luck in past sequence makes bad less likely in future bc sequence will look more random
(Clotfelter & Cook, 1993) 3 months for winning numbers to regain popularity.
Base rate neglect (Tversky & Kahneman, 1973)
30 engineers vs 70 lawyers
Estimations in reality
The conjunction fallacy Tverskey & Kahneman
Linda 31, single, outpsoken, very bright. Bank teller vs bank teller and women rights activist. Incoherent with subjective utility theory.1982