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Stability of the Representativeness Heuristic: Further Evidence from Choices Between Lottery Tickets

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

No 2021-24, 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 its 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, many players may avoid betting on a recently drawn combination because it would seem particularly improbable to be drawn again. We confirm both of these tendencies in a lab experiment and corroborate their external validity in two field experiments. However, we only find a weak link between these two choices: the same people do not necessarily exhibit the two biases. In this sense, there is little consistent manifestation of the RH across different tasks at the individual level. Nevertheless, there are some links related to rationality across the two choices – people who are willing to forgo a monetary payment to get the preferred ticket in one task are also willing to do it in the other. We find such preferences to be related to the misperception of probabilities and providing intuitive, incorrect answers in the Cognitive Reflection Test.

Keywords: Decision making under risk; 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: 47 pages
Date: 2021
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-spo and nep-upt
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