Traditional decision research shows that when people are told the probability of a rare event (e.g. the chance of side effects), they generally treat this event as if it were more likely than its objective probability (overweighting). In contrast, recent studies indicate that when outcomes are experienced firsthand, people tend to underweight the probability of rare events. In this paper, we su...

R research has advanced our understanding of how people use the advice of others to update their beliefs. Because groups and teams play a significant role in organizations and collectively are wiser than their individual members, it is important to understand their influence on belief revision as well. I report the results of four studies examining intuitions about group wisdom and the informat...

Reward probability crucially determines the value of outcomes. A basic phenomenon, defying explanation by traditional decision theories, is that people often overweigh small and underweigh large probabilities in choices under uncertainty. However, the neuronal basis of such reward probability distortions and their position in the decision process are largely unknown. We assessed individual prob...

Consistent with Protestants (Catholics) being more (less) risk-averse than the general population, we find that mutual funds located in regions with low Protestant (or high Catholic) population have higher total and idiosyncratic return volatilities. These higher volatilities are driven by portfolio under-diversification and aggressive interim trading, rather than overweighting risky (local) st...

When people predict the future behavior of a person, thinking of that target as an individual decreases the accuracy of their predictions. The present research examined one potential source of this bias, whether and why predictors overweight the atypical past behavior of individuals. The results suggest that predictors do indeed overweight the atypical past behavior of an individual. Atypical p...

Daniel Kahneman and Amos Tversky’s (1979) prospect theory, and the literature building from it, provide theories of risk attitudes based on a few regularities. Most importantly, evaluation of an outcome is influenced by how it compares to a reference point, with people exhibiting both a significantly greater aversion to losses than appreciation of gains, and a diminishing sensitivity to changes...

Two paradigms are commonly used to examine risky choice based on experiential sampling. The feedback paradigm involves a large number of repeated, consequential choices with feedback about the chosen (partial feedback) or chosen and foregone (full feedback) payoffs. The sampling paradigm invites cost-free samples before a single consequential choice. Despite procedural differences, choices in b...

According to a common conception in behavioral decision research, two cognitive processes-overestimation and overweighting-operate to increase the impact of rare events on people's choices. Supportive findings stem primarily from investigations in which people learn about options via descriptions thereof. Recently, a number of researchers have begun to investigate risky choice in settings in wh...

The effects of two behavioral decision making biases are evaluated within the context of a system dynamics model of a market for a commodity, overconfidence and availability. Overconfidence is modeled as an increase in the percent of a trader’s capital they are willing to commit to any trade and is found to have the effect of increasing profits for traders with good information relative to trad...

Tens of millions of people are currently choosing health coverage on a state or federal health insurance exchange as part of the Patient Protection and Affordable Care Act. We examine how well people make these choices, how well they think they do, and what can be done to improve these choices. We conducted 6 experiments asking people to choose the most cost-effective policy using websites mode...