Iii) Bias In Evaluation Of Conjunctive & Disjunctive Eventsctive Events

There are 3 types of events

i) simple events, eg taking marbles from a bag with equal numbers of red and white marbles (elementary event)

ii) conjunctive events, eg developing a new product that involves planning a series of events occurring (people tend to overestimate the probability of these events, ie anchoring - see earlier; overall probability of this event is lower than the probability of a simple event; the more events acquired, the lower the probability of success)

iii) disjunctive events like in the evaluation of risk (people tend to underestimate the probability of these events, ie anchoring - see earlier; the overall probability of this event is higher than the probability of each elementary event; even though the chance of failure of each individual event is low, the probability of an overall failure can be high, eg nuclear reactor)

. Anchoring in the assessment of subjective probability distribution

"...In decision analysis, experts are often required to express their beliefs about a quantity, such as the value of the Dow Jones average on a particular day, in the form of the probability distribution. Such a distribution is usually constructed by asking the person to select values of the quantity that correspond to specific percentiles of this subjective probability distribution...... subjects state overly narrow confidence intervals which reflect more certainly than is justified by their knowledge about the assessed quantities. This bias is common to naive and to sophisticated subjects and it is not eliminated by introducing proper scoring rules which provide incentives for external calibration. This effect is attributable, in part at least, to anchoring..."

Daniel Kahneman 2012

. Judgmental heuristics (cognitive biases)

"...These biases are not attributed to motivational effects such as wishful thinking or the distortion of judgement by payoffs and penalties..."

Daniel Kahneman 2012

. The same biases occur in both laypeople and professionals, ie tendency to predict the outcome which represents what they want


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