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Do Biases in Probability Judgment Matter in Markets? Experimental Evidence

Camerer, Colin F. (1987) Do Biases in Probability Judgment Matter in Markets? Experimental Evidence. American Economic Review, 77 (5). pp. 981-997. ISSN 0002-8282.

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Microeconomic theory typically concerns exchange between individuals or firms in a market setting. To make predictions precise, individuals are usually assumed to use the laws of probability in structuring and revising beliefs about uncertainties. Recent evidence, mostly gathered by psychologists, suggests probability theories might be inadequate descriptive models of individual choice. (See the books edited by Daniel Kahneman et al., 1982a, and by Hal Arkes and Kenneth Hammond, 1986.)

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Additional Information:© 1987 American Economic Association. I thank Mike Chemew, Marc Knez, Peter Knez, and Lisabeth Miller for research assistance. Helpful comments have been received from three anonymous referees, Greg Fischer, Len Green, David Grether, Dan Kahneman, John Kagel, Peter Knez, George Loewenstein, Charles Plott, Paul Slovic, Shyam Sunder, Richard Thaler, Keith Weigelt, and especially Howard Kunreuther. This research was funded by the Wharton Risk and Decision Processes Center, the Alfred Sloan Foundation grant no. 8551, and the National Science Foundation grant no. SES-8510758.
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Wharton Risk and Decision Processes CenterUNSPECIFIED
Alfred P. Sloan Foundation8551
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Official Citation:Do Biases in Probability Judgment Matter in Markets? Experimental Evidence Colin F. Camerer The American Economic Review Vol. 77, No. 5 (Dec., 1987), pp. 981-997 Published by: American Economic Association Article Stable URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:22188
Deposited By: Tony Diaz
Deposited On:09 Mar 2011 22:39
Last Modified:26 Dec 2012 12:56

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