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Intuitive Biases in Choice versus Estimation: Implications for the Wisdom of Crowds

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  • Joseph P. Simmons
  • Leif D. Nelson
  • Jeff Galak
  • Shane Frederick
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    Abstract

    Although researchers have documented many instances of crowd wisdom, it is important to know whether some kinds of judgments may lead the crowd astray, whether crowds’ judgments improve with feedback over time, and whether crowds’ judgments can be improved by changing the way judgments are elicited. We investigated these questions in a sports gambling context (predictions against point spreads) believed to elicit crowd wisdom. In a season-long experiment, fans wagered over $20,000 on NFL football predictions. Contrary to the wisdom-of-crowds hypothesis, faulty intuitions led the crowd to predict “favorites” more than “underdogs” against point spreads that disadvantaged favorites, even when bettors knew that the spreads disadvantaged favorites. Moreover, the bias increased over time, a result consistent with attributions for success and failure that rewarded intuitive choosing. However, when the crowd predicted game outcomes by estimating point differentials rather than by predicting against point spreads, its predictions were unbiased and wiser.

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    File URL: http://www.jstor.org/stable/pdfplus/10.1086/658070
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    File URL: http://www.jstor.org/stable/full/10.1086/658070
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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Consumer Research.

    Volume (Year): 38 (2011)
    Issue (Month): 1 ()
    Pages: 1 - 15

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    Handle: RePEc:ucp:jconrs:doi:10.1086/658070

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    Web page: http://www.journals.uchicago.edu/JCR/

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    Cited by:
    1. Ethan Mollick & Ramana Nanda, 2014. "Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts," Harvard Business School Working Papers 14-116, Harvard Business School, revised Jun 2014.

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