The limitations of the representativeness heuristic: further evidence from choices between lottery tickets

Michał Krawczyk () and Joanna Rachubik
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Michał Krawczyk: Faculty of Economic Sciences, University of Warsaw

No 2019-11, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: The representativeness heuristic (RH) proposes that people expect even a small sample to have similar characteristics to the parent population. One domain in which it appears to operate is the preference for combinations of numbers on lottery tickets: most players seem to avoid very characteristic, “unrepresentative” combinations, e.g. only containing very low numbers. Likewise, most players may avoid betting on a combination that was drawn recently, because it would seem particularly improbable to be drawn again. We confirm both of these tendencies in two field experiments, building upon Krawczyk and Rachubik (2019, KR19). However, we find no link between these two choices: it is not the same people that show the two biases. In this sense, the RH does not organize the data well. Nevertheless, there are some links related to rationality across the two choices – people who are willing to forgo a monetary payment in order to get the preferred ticket in one task are also willing to do it in the other. We find such preference to be related with misperception of probabilities and providing intuitive, incorrect answers in the Cognitive Reflection Test.

Keywords: Decision making under risk; Gambler’s fallacy; Lottery choice; Perception of randomness; Number preferences in lotteries; Representativeness heuristic (search for similar items in EconPapers)
JEL-codes: C93 D01 D81 D91 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2019
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2019-11

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