Revealed Preference and the Strength/Weight Hypothesis

Most decisions are made in the face of uncertainty due to incomplete evidence. The strength/weight hypothesis is that people are more persuaded when that evidence is extreme (high strength) than when it is reliable (high weight), even when these two dimensions of evidence are equivalent according to Bayes Rule. We investigate this hypothesis in an incentive-compatible revealed preference experiment. We confirm the hypothesis. Although earlier researchers using hypothetical, stated preference methods have found a pattern of overconfidence for high strength/low weight information, and underconfidence for low strength/high weight information, we find that underconfidence is the main direction of the bias. Moreover, the strength/weight effect in our revealed preference experiment was much smaller than in earlier stated preference studies.