The coexistence of overestimation and underweighting of rare events and the contingent recency effect

Judgment and Decision Making

Volumn 4, Issue 6, 2009, Pages 447-460

  Barron, Greg ^a   Yechiam, Eldad ^b  

^a HARVARD BUSINESS SCHOOL   (United States)

^b TECHNION ISRAEL INSTITUTE OF TECHNOLOGY   (Israel)

Author keywords

Choice; Decision making; Judgment; Learning; Probability; Rare events; Terror

Indexed keywords

EID: 72249102387     PISSN: None     EISSN: 19302975     Source Type: Journal    
DOI: None     Document Type: Article

References (45)

1. Ariely, D., Gneezy, U., & Haruvy, E. (2004). Social norms and the price of zero. Unpublished manuscript, MIT.
2. Associated Press. (2002). 70 Palestinian suicide bombing attacks against Israel in 21 months of violence. Jun 19, 2002.
3. Ayton, P., & Fischer, I. (2004). The Gambler's Fallacy and the Hot-Hand Fallacy: Two Faces of Subjective Randomness? Memory and Cognition, 32, 1369-1378.
4. Barron, G., & Erev, I. (2003). Feedback-based decisions and their limited correspondence to description-based decisions. Journal of Behavioral Decision Making, 16, 215-233.
5. Beron, K., Murdoch, J., Thayer, M., & Vijverberg, W. (1997). An analysis of the housing market before and after the 1989 Loma Prieta earthquake. Land Economics, 73, 101-113.
6. Bin, O., & Polasky, S. (2004). Effects of flood hazards on property values. Evidence before and after Hurricane Floyd. Land Economics, 80, 490-500
7. Bush, R., & Mosteller, F. (1955). Stochastic models for learning. New York: Wiley.
8. Camerer, C., & Ho, T. (1999). Experience-weighted At-traction Learning in Normal Form Games. Econometrica. 67, 827-874.
9. Carbone, J. C., Hallstrom, D. G., & Smith, V. K. (2006). Can natural experiments measure behavioral responses to environmental risks? Environmental and Resource Economics, 33, 273-292.
10. Donovan, G. H., Champ, P. A., & Butry, D. T. (2007). Wildfire risk and housing prices: a case study from Colorado Springs. Land Economics, 83, 217-233
11. Erev, I., & Barron, G. (2005). On adaptation, maximization, and reinforcement learning among cognitive strategies. Psychological Review, 112, 912-931.
12. Erev, I., Bornstein, G., & Wallsten, T. S. (1993). The negative effect of probability assessments on decision quality. Organizational Behavior and Human Decision Processes, 55, 78-94.
13. Erev, I., Ert, E., & Yechiam, E. (2008). Loss aversion, diminishing sensitivity, and the effect of experience on repeated decisions. Journal of Behavioral Decision Making, 21, 575-597.
14. Erev, I. & Wallsten, T. S. (1993), The effect of explicit probabilities on the decision weights and the reflec-tion effect. Journal of Behavioral Decision Making, 6,221-241.
15. Erev, I., Wallsten, T. S., & Budescu, D. V. (1994). Simultaneous over-and underconfidence: The role of error in judgment processes. Psychological Review, 101, 519-527.
16. Estes, W. K. (1950). Toward a statistical theory of learning. Psychological Review, 57, 94-107.
17. Festinger, L., & Carlsmith, J M. (1959). Cognitive consequences of forced compliance. Journal of Abnormal and Social Psychology, 58, 203-210.
18. Fischhoff, B., Parker, A. M., Bruine De Bruin, W., Downs, J., Palmgren, C., Dawes, R., & Manski, C. F. (2000). Teen expectations for significant life events. Public Opinion Quarterly, 64, 189-205.
19. Fox, C., & Hadar, L. (2006). "Decisions from experience" = sampling error + prospect theory: Reconsidering Hertwig, Barron, Weber, & Erev (2004). Judgment and Decision Making, 1, 159-161.
20. Fox, C. R., & Tversky, A. (1998). A belief-based account of decision under uncertainty. Management Science, 44,879-895.
21. Hau, R., Plescak, T. J., Kiefer, J., & Hertwig, R. (2008). The description-experience gap in risky choice: The role of sample size and experienced probabilities. Journal of Behavioral Decision Making, 21, 493-518.
22. Heath, C., & Tversky, A. (1991). Preference and belief: Ambiguity and competence in choice under uncertainty. Journal of Risk and Uncertainty, 4, 5-28.
23. Hertwig, R., Barron, G., Weber, E., & Erev, I. (2004). Decisions from experience and the effect of rare events in risky choices. Psychological Science, 15, 534-539.
24. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263-291.
25. Kareev, Y. (2000). Seven (indeed, plus or minus two) and the detection of correlations. Psychological Review, 107,397-402.
26. Kareev, Y., Arnon, S., & Horwitz-Zeliger, R. (2002). On the misperception of variability. Journal of Experimental Psychology: General, 131, 287-297.
27. Langer, E. J. (1975). The illusion of control. Journal of Personality and Social Psychology, 32, 311-328.
28. Lee, W. (1971). Decision Theory Human Behavior. New York: Wiley.
29. Lichtenstein, S., Slovic, P., Fischhoff, B., & Combs, B. (1978). Judged frequency of lethal events. Journal of Experimental Psychology: Human Learning and Memory, 4, 551-578.
30. Lopes, L. L. (1996). When time is of the essence: Averaging, aspiration, and the short run. Organizational Behavior and Human Decision Processes, 65, 179-189.
31. March, J. G. (1996). Learning to be risk averse. Psycho-logical Review, 103, 309-319.
32. Nakagawa, M., Saito, M., & Yamaga, H. (2007). Earth-quake risks and housing rents: Evidence from the tokyo metropolitan area. Regional Science and Urban Economics, 37, 87-99.
33. Newell, B. R., & Rakow, T. (2007). The role of experi-ence in decisions from description. Psychonomic Bul-letin and Review, 14, 1133-1139.
34. Poulton, E. C. (1979). Models for biases in judging sensory magnitude. Psychological Bulletin, 86, 777-803.
35. Stevens, S. S., & Greenbaum, H. B. (1966). Regression effect in psychophysical judgment. Perception & Psychophysics, 1, 439-446.
36. Sundali, J., & Croson, R. (2006). Biases in casino betting: The hot hand and the gambler's fallacy. Judgment and Decision Making, 1, 1-12.
37. Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1130.
38. Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: cumulative representation of uncertainty. Journal of Risk and Uncertainty, 9, 195-230.
39. Ungemach, C., Chater, N., & Stewart, N. (2009). Are probabilities overweighted or underweighted when rare outcomes are experienced (rarely)? Psychological Science, 20, 473-479.
40. Viscusi, W. K. (1992). Smoking: Making the risky decision. New York: Oxford University Press.
41. Wallsten, T. S., & Gu, H. B. (2003). Distinguishing choice and subjective probability estimation processes: Implications for theories of judgment and for cross-cultural comparisons. Organizational Behavior and Human Decision Processes, 90, 111-123.
42. Weber, E. U., Blais, A. R., & Shafir, S. (2004). Predicting risk sensitivity in humans and lower animals: Risk as variance or coefficient of variation. Psychological Review, 111, 430-445.
43. Yates J. F., Lee J. W., Shinotsuka H., Patalano A. L., & Sieck W. R. (1998). Cross-cultural variations in probability judgment accuracy: Beyond general knowledge overconfidence? Organizational Behavior and Human Decision Processes, 74, 89-117.
44. Yechiam, E., & Busemeyer, J. R. (2006). The effect of foregone payoffs on underweighting small probability events. Journal of Behavioral Decision Making, 19, 1-16.
45. Zacks, R. T., & Hasher, L. (2002). Frequency processing: A twenty-five year perspective. In P. Sedlmeier, & B. Tilmann (Eds.), ETC. Frequency processing and cognition (pp. 21-36). New York, NY, US: Oxford University Press.