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Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes From a Representative Sample

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  • Thomas Dohmen

    ()

  • Armin Falk
  • David Huffman
  • Felix Marklein
  • Uwe Sunde

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.

Suggested Citation

  • Thomas Dohmen & Armin Falk & David Huffman & Felix Marklein & Uwe Sunde, 2009. "Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes From a Representative Sample," Post-Print hal-00723191, HAL.
    • Handle: RePEc:hal:journl:hal-00723191
    DOI: 10.1016/j.jebo.2009.07.014
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00723191
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    References listed on IDEAS

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    More about this item

    Keywords

    C90; D00; D10; D80; D81; H00; Bounded Rationality; Probability Judgment; Gambler's Fallacy; Hot Hand Fallacy; Representative Design; Long-Term Unemployment; Financial Decision Making;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D00 - Microeconomics - - General - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H00 - Public Economics - - General - - - General

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