Dohmen, Thomas Falk, Armin Huffman, David Marklein, Felix Sunde, Uwe
Year of Publication:
IZA Discussion Papers No. 4170
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.
Bounded rationality probability judgment gambler's fallacy hot hand fallacy representative design long-term unemployment financial decision making