Intuitions About Combining Opinions: Misappreciation of the Averaging Principle

Richard P. Larrick () and Jack B. Soll ()
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Richard P. Larrick: Fuqua School of Business, Duke University, Durham, North Carolina 27708
Jack B. Soll: Fuqua School of Business, Duke University, Durham, North Carolina 27708

Management Science, 2006, vol. 52, issue 1, 111-127

Abstract: Averaging estimates is an effective way to improve accuracy when combining expert judgments, integrating group members' judgments, or using advice to modify personal judgments. If the estimates of two judges ever fall on different sides of the truth, which we term bracketing, averaging must outperform the average judge for convex loss functions, such as mean absolute deviation (MAD). We hypothesized that people often hold incorrect beliefs about averaging, falsely concluding that the average of two judges' estimates would be no more accurate than the average judge. The experiments confirmed that this misconception was common across a range of tasks that involved reasoning from summary data (Experiment 1), from specific instances (Experiment 2), and conceptually (Experiment 3). However, this misconception decreased as observed or assumed bracketing rate increased (all three studies) and when bracketing was made more transparent (Experiment 2). Experiment 4 showed that flawed inferential rules and poor extensional reasoning abilities contributed to the misconception. We conclude by describing how people may face few opportunities to learn the benefits of averaging and how misappreciating averaging contributes to poor intuitive strategies for combining estimates.

Keywords: averaging opinions; combining forecasts; information aggregation; advice taking; heuristics and biases (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (97)

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