Basic Concepts
From Dickinson College Wiki
Basic Concepts
Probability Judgment
The Methods of Behavioral Economics
- They define themselves, not on the basis of the research methods that they employ, but rather their application of psychological insights to economics.
Heuristic Mechanism
- Availability heuristic
- people may judge the probabilities of future events based on how easy those events are to imagine or to retrieve from memory"
- Hindsight bias
- "Because events which actually occurred are easier to imagine than counterfactual events that did not, people often overestimate the probability they previously attached to events which later happened"
- Curse of Knowledge bias
- "people who know a lot find it hard to imagine how little others know
- Representativeness
- "People judge conditional probabilities like P(hypothesis|data) or P(examples| class) by how well the data represents the hypothesis or the example represents the class.
- Law of Small Numbers
- "Small samples are thought to represent the properties of the statistical process that generate them"
