How People Use Statistics / Pedro Bordalo, John J. Conlon, Nicola Gennaioli, Spencer Yongwook Kwon, Andrei Shleifer.

Format:

Book

Author/Creator:

Bordalo, Pedro.

Contributor:

National Bureau of Economic Research.

Conlon, John J.

Gennaioli, Nicola.

Kwon, Spencer Yongwook.

Shleifer, Andrei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31631.

NBER working paper series no. w31631

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We document two new facts about the distributions of answers in famous statistical problems: they are i) multi-modal and ii) unstable with respect to irrelevant changes in the problem. We offer a model in which, when solving a problem, people represent each hypothesis by attending "bottom up" to its salient features while neglecting other, potentially more relevant, ones. Only the statistics associated with salient features are used, others are neglected. The model unifies biases in judgments about i.i.d. draws, such as the Gambler's Fallacy and insensitivity to sample size, with biases in inference such as under- and overreaction and insensitivity to the weight of evidence. The model makes predictions about how changes in the salience of specific features should jointly shape the prevalence of these biases and measured attention to features, but also create entirely new biases. We test and confirm these predictions experimentally. Bottom-up attention to features emerges as a unifying framework for biases conventionally explained using a variety of stable heuristics or distortions of the Bayes rule.

Notes:

Print version record

August 2023.