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Bayes rule as a descriptive model: The representative heuristic

Grether, David M. (1980) Bayes rule as a descriptive model: The representative heuristic. Quarterly Journal of Economics, 95 (3). pp. 537-557. ISSN 0033-5533.

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Results of experiments designed to test the claim of psychologists that expected utility theory does not provide a good descriptive model are reported. The deviation from tested theory is that, in revising beliefs, individuals ignore prior or base-rate information contrary to Bayes rule. Flaws in the evidence in the psychological literature are noted, an experiment avoiding these difficulties is designed and carried out, and the psychologists' predictions are stated in terms of a more general model. The psychologists' predictions are confirmed for inexperienced or financially unmotivated subjects, but for others the evidence is less clear.

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Additional Information:© 1980 by the President and Fellows of Harvard College. Financial support by the National Aeronautics and Space Administration is gratefully acknowledged. I would like to thank my colleagues, Forrest D. Nelson, Charles R. Plott, and Louis L. Wilde for their many helpful suggestions and comments, and Steven Matthews, Brian Binger, Elizabeth Hoffman, and Gerhard Befeld for their research assistance. Formerly SSWP 245.
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Subject Keywords:Heuristics, Financial incentives, Economic theory, Experiment design, Maximum likelihood estimation, Coefficients, Bayes rule, Probabilities, Economic models, Economic uncertainty
Issue or Number:3
Record Number:CaltechAUTHORS:20171201-140948539
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83627
Deposited By: Jacquelyn Bussone
Deposited On:01 Dec 2017 22:30
Last Modified:03 Oct 2019 19:08

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