NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Don A. Moore

Haas Management of Organizations Group
Haas School of Business
University of California—Berkeley

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of California—Berkeley

NBER Working Papers and Publications

October 2017Biased Beliefs About Random Samples: Evidence from Two Integrated Experiments
with Daniel J. Benjamin, Matthew Rabin: w23927
This paper describes results of a pair of incentivized experiments on biases in judgments about random samples. Consistent with the Law of Small Numbers (LSN), participants exaggerated the likelihood that short sequences and random subsets of coin flips would be balanced between heads and tails. Consistent with the Non-Belief in the Law of Large Numbers (NBLLN), participants underestimated the likelihood that large samples would be close to 50% heads. However, we identify some shortcomings of existing models of LSN, and we find that NBLLN may not be as stable as previous studies suggest. We also find evidence for exact representativeness (ER), whereby people tend to exaggerate the likelihood that samples will (nearly) exactly mirror the underlying odds, as an additional bias beyond LSN. Ou...
 
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