Biased probability judgment: evidence of incidence and relationship to economic outcomes from a representative sample

Arbeitspapier

Many economic decisions involve a substantial amount of uncertainty, and therefore crucially depend on how individuals process probabilistic information. In this paper, we investigate the capability for probability judgment in a representative sample of the German population. Our results show that almost a third of the respondents exhibits systematically biased perceptions of probability. The findings also indicate that the observed biases are related to individual economic outcomes, which suggests potential policy relevance of our findings.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 4170

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: General ; Microeconomics: General ; Household Behavior: General ; Information, Knowledge, and Uncertainty: General ; Criteria for Decision-Making under Risk and Uncertainty ; Public Economics: General
• Subject: Bounded rationality ; probability judgment ; gambler's fallacy ; hot hand fallacy ; representative design ; long-term unemployment ; financial decision making ; Beschränkte Rationalität ; Entscheidung bei Unsicherheit ; Test ; Langzeitarbeitslosigkeit ; Konsumentenverhalten ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dohmen, Thomas ; Falk, Armin ; Huffman, David ; Marklein, Felix ; Sunde, Uwe
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/35424
• URN: urn:nbn:de:101:1-2009060824
• Last update: 10.03.2025, 11:44 AM CET