Economics Dictionary of ArgumentsHome
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| Cognitive biases: A cognitive bias is a systematic pattern of deviation from rationality in judgment or decision-making, influenced by factors like perception, memory, or social cues. _____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Experimental Economics on Cognitive Biases - Dictionary of Arguments
Parisi I 93 Cognitive biases/Experimental psychology/Sullivan/Holt: [an] observation in economics experiments is the general inability of informed subjects to introspectively reproduce the judgments of relatively uninformed subjects, even when incentivized to do so - a phenomenon termed the curse of knowledge (Camerer, Loewenstein, and Weber, 1989(1)). Hindsight bias/experiments: Unfortunately, substantial experimental evidence indicates that people are not very good at this type of ex post assessment of ex ante probabilities. A particularly uncomfortable problem is hindsight bias - the tendency of people who observe the outcome of a random event to overstate the ex ante probability of that outcome’s occurrence (Fischhoff, 1975(2); Slovic and Fischhoff, 1977(3)). Information asymmetry/introspection: A closely related observation in economics experiments is the general inability of informed subjects to introspectively reproduce the judgments of relatively uninformed subjects, even when incentivized to do so - a phenomenon termed the curse of knowledge (Camerer, Loewenstein, and Weber, 1989(1)). >Introspection, >Knowledge, >Behavior. a) One way to interpret these results is as a fundamental strike against the validity of culpability determinations under the negligence standard: even the most well-intentioned jurors will be structurally biased toward overstating the dangerousness of the defendant’s conduct, all else equal. b) Alternatively, and more constructively, economic experiments could be seen as a tool for understanding and remedying judgment biases that undermine the standard. Camerer, Loewenstein, and Weber (1989)(1), for example, find that participation in a market structure helps to partially reduce the curse of knowledge. Whether jury deliberation performs a similar function is an open empirical question. Similarly, a recent economic experiment by Wu et al. (2012)(4) suggests that providing informed Parisi I 94 subjects with specific details about the evaluative process used by an uninformed subject may help to substantially reduce hindsight bias when the informed subject attempts to assess the judgment of the uninformed subject. Hindsight bias: (...) the influence of hindsight bias on fact-finding is not limited to actions in negligence. Mandel (2006)(5) considers hindsight bias in patent applications, for example, but the problem should be expected to arise generically whenever the fact-finder is required to consider the ex ante probability of an ex post known outcome. Baysian updating: (...) hindsight bias is not the only judgment bias implicating probability determinations under the negligence standard (see e.g. Kahneman, Slovic, and Tversky, 1982)(6). Experimental evidence of the difficulty of Bayesian updating (Grether 1992(7); see also Koehler and Kaye, 1991(8)) and possible workarounds (e.g. Gigerenzer and Hoffrage, 1995(9)) are particularly on-point. 1. Camerer, C., G. Loewenstein, and M. Weber (1989). “The curse of knowledge in economic settings: An experimental analysis.” Journal of Political Economy 97(5): 1232–1254. 2. Fischhoff, B. F. (1975). “Hindsight ≠ Foresight: the Effect of Outcome Knowledge on Judgment under Uncertainty.” Journal of Experimental Psychology: Human Perception and Performance 1(3): 288–299. 3. Slovic, P. and B. Fischhoff (1977). “On the Psychology of Experimental Surprises.” Journal of Experimental Psychology: Human Perception and Performance 3(4): 544–551. 4. Wu, D. A., S. Shimojo, S. W. Wang, and C. F. Camerer (2012). “Shared visual attention reduces hindsight bias.” Psychological Science 23(12): 1524–1533. 5. Mandel, G. N. (2006). “Patently Non-Obvious: Empirical Demonstration That the Hindsight Bias Renders Patent Decisions Irrational.” Ohio State Law Journal 67: 1391–1463. 6. Kahneman, D., P. Slovic, and A. Tversky (1982). Judgment under Uncertainty: Heuristics and Biases. Cambridge: Cambridge University Press. 7. Grether, D. M. (1992). “Testing Bayes Rule and the Representativeness Heuristic: Some Experimental Evidence.” Journal of Economic Behavior & Organization 17(1): 31–57. 8. Koehler, J. J. and D. H. Kaye (1991). “Can Jurors Understand Probabilistic Evidence?” Journal of the Royal Statistical Society: Series A 154(1): 75–81. 9. Gigerenzer, G. and U. Hoffrage (1995). “How to Improve Bayesian Reasoning Without Instruction: Frequency Formats.” Psychological Review 102(4): 684–704. Sullivan, Sean P. and Charles A. Holt. „Experimental Economics and the Law“ In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Experimental Economics Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
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