NDLI: Overconfidence in Probability Distributions: People Know They Don’t Know but They Don’t Know What to Do About It

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Overconfidence in Probability Distributions: People Know They Don’t Know but They Don’t Know What to Do About It

Content Provider	Scilit
Author	Soll, Jack B. Palley, Asa Klayman, Joshua Moore, Don
Copyright Year	2019
Description	Journal: SSRN Electronic Journal Quantifying uncertainty in the form of a probability distribution is a critical step in many managerial decision problems. However, a large body of previous work has documented pervasive overconfidence in subjective probability distributions (SPDs). We develop new methods to analyze judgments about variables which entail both epistemic and aleatory uncertainty and, in three experiments, study the quality of people’s SPDs in such settings. We find that although SPDs roughly match the aleatory concentration of the real-world distributions, people’s judgments are consistently overconfident because they fail to spread out probability mass to account for their own epistemic uncertainty about the location and other properties of the distribution. Although people are aware of this lack of knowledge, they do not know how to appropriately incorporate it into their SPDs. Our results offer new insights into the causes of overconfidence in real-world judgment domains and shed light on potential ways to address this fundamental bias.
Related Links	https://escholarship.org/content/qt3dq9h1k9/qt3dq9h1k9.pdf?t=pxz502 https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3435793
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3435793
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2019-03-13
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Business and Management Subjective Probability Distributions Epistemic Uncertainty Aleatory Uncertainty Judgment Elicitation
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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