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The Similarity Heuristic

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  • Daniel Read

    ()
    (Durham Business School)

  • Yael Grushka-Cockayne

    ()
    (London Business School)

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    Abstract

    Decision makers are often called on to make snap judgments using fast-and- frugal decision rules called cognitive heuristics. Although early research into cognitive heuristics emphasized their limitations, more recent research has focused on their high level of accuracy. In this paper we investigate the performance a subset of the representativeness heuristic which we call the similarity heuristic. Decision makers who use it judge the likelihood that an instance is a member of one category rather than another by the degree to which it is similar to others in that category. We provide a mathematical model of the heuristic and test it experimentally in a trinomial environment. The similarity heuristic turns out to be a reliable and accurate choice rule and both choice and response time data suggest it is also how choices are made.

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    Bibliographic Info

    Paper provided by Durham University Business School in its series Working Papers with number 2007_09.

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    Date of creation: 20 Mar 2007
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    Handle: RePEc:dur:durham:2007_09

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    Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England
    Phone: +44 (0)191 334 5200
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    Web page: http://www.dur.ac.uk/business
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    Related research

    Keywords: heuristics and biases; fast-and-frugal heuristics; similarity; representative design; base-rate neglect; Bayesian inference;

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    1. Grether, David M., 1992. "Testing bayes rule and the representativeness heuristic: Some experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 31-57, January.
    2. Camerer, Colin F, 1987. "Do Biases in Probability Judgment Matter in Markets? Experimental Evidence," American Economic Review, American Economic Association, vol. 77(5), pages 981-97, December.
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