The
representativeness heuristic misleads people when similarity and frequency diverge, and it may lead to absurd judgments.
We investigate the behavior of individuals after a loss event to observe the
representativeness heuristic in the form of the gambler's fallacy (Clotfelter and Cook, 1993).
Representativeness Heuristic Investor Sentiment and Overreation to Accounting Earnings: The Case of Tunisian Stock Market.
Also affected by the
representativeness heuristic is judgment, the tendency to estimate whether the situation, event, or object at hand is a member of a certain category based on how typical of the category it is perceived to be (Grether, 1980, 1992; Kahneman & Tversky; Tversky & Kahneman, 1974).
(104) Kerr argues two cognitive biases will thereby be brought into play: the
representativeness heuristic and anchoring.
Representativeness heuristic. For the
representativeness heuristic, an event is judged to be probable to the extent that it represents the essential features, so people tend to judge the probability of an event by finding a comparable known event and assuming that the probabilities will be similar (Tversky & Kahneman, 1974).
When purchasing funds, we posit that investors use a
representativeness heuristic, where recent performance is deemed overly representative of a fund manager's true ability.
Most of us will answer librarian, thereby falling for what Kahneman calls the
representativeness heuristic. It may be true that librarians tend to fit the description, but there are 20 times as many male farmers as male librarians in this country.
For instance, when a clinician sets out to prescribe a treatment to a patient, based on his experience with the particular treatment, he is likely to be influenced by the results in a similar patient he had previously treated (the
representativeness heuristic), and any (easily recalled) dramatic results with the treatment (the availability heuristic).
Thus, this simplifying behaviour has been verified in the four last formulated hypotheses, clearly showing the high consideration given by consumers in the decision process: (a) size and reputation of the entity (equivalent to the
representativeness heuristic); (b) comfort and ease of contracting in the usual entity (Availability heuristic); and (c) resistance to change entity (Anchoring-Adjustment heuristic), even when the financial results obtained by the consumer are perceived as modestly satisfactory (Lopez y Blasco, 2008).
The conjunction error and the
representativeness heuristic. Social Cognition, 3, 266-279.
The three heuristics examined by Amir and Ganzach are the
representativeness heuristic, the anchoring and adjustment heuristic, and the leniency heuristic.
