Testing bayes rule and the representativeness heuristic: Some experimental evidence

Abstract

The psychological literature has identified a number of heuristics which individuals may use in making judgements or choices under uncertainty. Mathematically equivalent problems may be treated differently depending upon details of the decision setting. The results presented in this paper are consistent with those findings. In equivalent problems subjects appear to adopt different strategies in response to observing different data. Some experiments included financial incentives for accuracy and some did not. The majority of subjects in both treatments behaved reasonably, but of those lacking financial incentives a larger proportion gave absurd responses. This suggests that data from decision experiments in which no financial incentives were should be treated as possibly contaminated and statistical methods robust against outliers employed.