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

Thomas Dohmen, Armin Falk, David Huffman, Felix Marklein and Uwe Sunde

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: 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. ; Bounded rationality Probability judgment Gambler’s fallacy Hot hand fallacy Representative design Long-term unemployment Financial decision making

Date: 2009
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Published in Journal of Economic Behavior \& Organization 3 72(2009): pp. 903-915

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Journal Article: Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample (2009)
Working Paper: Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes From a Representative Sample (2009)
Working Paper: Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes from a Representative Sample (2009)
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