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

Thomas Dohmen, Armin Falk, David Huffman, Felix Marklein and Uwe Sunde
Additional contact information
Felix Marklein: Federal Ministry of Finance

No 4170, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: long-term unemployment; hot hand fallacy; representative design; gambler's fallacy; probability judgment; bounded rationality; financial decision making (search for similar items in EconPapers)
JEL-codes: C90 D00 D10 D80 D81 H00 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-05
New Economics Papers: this item is included in nep-cbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

Published - published in: Journal of Economic Behavior and Organization, 2009, 72 (3), 903-915

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Related works:
Journal Article: Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample (2009)
Working Paper: Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes From a Representative Sample (2009)
Working Paper: Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample (2009)
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