The judgment-decision paradox in experience-based decisions and the contingent recency effect
By: Greg Barron, Ido Erev, Eldad Yechiam
Contributors: Erev, Ido; Yechiam, Eldad; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 07-003; Working paper (Harvard Business School. Division of Research) -- 07-003
Publisher: Division of Research, Harvard Business School
Published: 2006
Place of publication: Boston]
Language: eng
Number of pages: 27
Description: The current paper explores a judgment-decision paradox in experience-based decisions: the finding that rare events are overweighted in probability judgments but are underweighted in repeated decisions under uncertainty. Two laboratory studies examine both decisions and probability assessments within the same paradigm. The results reveal overweighting and negative recency in probability assessments but underweighting and positive recency in choices. At the same time, there remains an overall consistency between choices and assessments. A third study validates the results in a field study. The results show that, after a negative rare-event (i.e. a suicide bombing) people believe the risk to have decreased (negative recency) but are more cautious (positive recency).
Notes: Includes bibliographical references.