This probability only works over long sequences, like tossing a coin a hundred times. Like goes with like: The role of representativeness in erroneous and pseudoscientific beliefs. Gilovich, T., & Savitsky, K. (1996, March/April). Because we rely on categories and prototypes to guide our perception of others, we can easily end up drawing on stereotypes to make judgments about other people. The Decision Lab is a think tank focused on creating positive impact in the public and private sectors by applying behavioral science. The representativeness heuristic can hinder accurate judgments of probability by emphasizing aspects of the event in question that are similar to the prototype or by masking other diagnostic information that demonstrates the event’s dissimilarity to the prototype. All Rights Reserved, Example 1 - Representativeness, stress, and stomach ulcers, Example 2 - Astrology and representativeness, Stereotypes. 1. The influence of categories on perception: Explaining the perceptual magnet effect as optimal statistical inference. The second option, “Laura works in a bank and is active in the feminist movement” is a subset of the first option, “Laura works in a bank.” Because of that fact, the second option can’t be more probable than the first. When we use the representativeness heuristic, we make probability judgments about the likelihood that an object or event arises from some category based on the extent to which the object or event in question is similar to the prototypical example of that category. Let’s look at strategies to protect against this heuristic as an investor. It focuses on the fact that investors are not always rational. ... Stereotypes. Bordalo, P., Coffman, K., Gennaioli, N., & Shleifer, A. Suppose, for example, that the question is whether some person, Nick, is a librarian or a farmer. The Power of the Representativeness Heuristic. You know that one of them is a mathematician, while the other one is a musician. Learn step-by-step from professional Wall Street instructors today. Representativeness bias is the reason why people create stereotypes. The third kind of heuristic is the availability heuristic. representativeness heuristic and the biases that it generates (Gilovich et al., 2002). if(wpruag()){document.write("