This paper reports the results of a series of experiments designed to test whether and to what extent individuals succumb to the conjunction fallacy. Using an experimental design of Kahneman and Tversky (1983), it finds that given mild incentives, the proportion of individuals who violate the conjunction principle is significantly lower than that reported by Kahneman and Tversky. Moreover, when subjects are allowed to consult with other subjects, these proportions fall dramatically, particularly when the size of the group rises from two to three. These findings cast serious doubts about the importance and robustness of such violations for the understanding of real-life economic decisions.
More here. Hat tip to Dan Houser.
4 Comments
The “Linda” example they used has dated quite a lot in the 25 years since Kahneman and Tversky used it.
The proportion of wrong answers in groups is not dropping faster than it should – that is, if you assume that any group containing a single insightful responder answers correctly, then the odds are no lower than they should be. In fact they are slightly too high. 58% for singles vs. 48% for pairs vs. 25% for trios. Or with incentives, 33% for singles vs. 13% for pairs vs. 10% for trios. We can’t assume an effect of deliberation rather than a sharing of individual insight.
Even if it’s just about sharing insight, it is interesting that people were receptive to the insight, especially since Kahneman & Tversky had one study that implied that people are not. K&T presented people with two arguments, the correct argument explaining why Linda is more likely to be a bank-teller and an incorrect argument saying that she’s more likely to be a feminist bank teller because that sounds more like her, and a majority (65%) found the incorrect argument more convincing.
Still, this new paper is vastly overstating the implications of their study. They used the transparent within-subjects version of the Linda problem, but the between-subjects version (where each person is asked to consider either “bank teller” or “feminist bank teller,” not both) is more like the kind of problems that we run into in real life. More generally, the problem is that people think about likelihood in terms of representativeness when they should be thinking extensionally; the conjunction fallacy is just one particularly egregious consequence of that bias. This just shows that there are some cases where groups of people can overcome that problem.
We hear a lot about wealth not being a fixed pie. Why don’t we hear the same about rationality?