Representativeness Heuristic
Biases wherein the similarity of two events makes people wrongly estimate the probability of an event
What is Representativeness Heuristic?
Representative heuristics are biases wherein the similarity of two events makes people wrongly estimate the probability of an event. People falsely believe that two events are more closely related than they are.
Thus, people confuse the similarity of two events with the actual probability of the outcome. It shows how when there is uncertainty in decision-making, people tend to take a mental shortcut by comparing them to pre-existing concepts they already have in their minds.
The concept was first proposed by psychologists Amos Tversky and Daniel Kahneman in the early 1970s through the famous Linda the bank teller and Tom W. riddle we will cover later on.
This bias can also often lead to people making irrational/poor decisions or relying on stereotypes. It also forms the basis for other cognitive biases like the conjunction fallacy and the gambler's fallacy.
Key Takeaways
- Representative heuristics occurs when people misestimate an event's probability due to the similarity of two events. People often mistakenly think that two events are more connected than they are.
- It involves using pre-existing prototypes or stereotypes as representative of the likelihood of an event.
- This is a common bias that is covered in behavioral economics. Psychologists Amos Tversky and Daniel Kahneman first proposed the concept in the early 1970s.
- This can lead to a person making irrational and poor decisions. However, the bias may be mitigated by being more aware of it and trying to apply more logic or statistics while making decisions.
Understanding Representativeness Heuristics
To understand this concept, we must first understand what 'heuristics' are. A heuristic is nothing but a rule of thumb or a shortcut people take to solve a problem/make a decision.
It entails using information people already know and adjusting it according to the question to make an educated guess.
For example, to guess the gestation period of an animal, people may first think of humans, who take nine months and then try to arrive at a logical conclusion by adjusting that information.
Heuristics can be of 2 types: The availability heuristic or the representativeness heuristic.
The availability heuristic is when people use existing examples in their minds, meaning it uses a person's memory and existing knowledge.
For example, if a person living in New York is asked to guess the population of, say, San Jose.
The person may use his existing knowledge of New York's population (8.6 million) to estimate San Jose's. Let's say he guesses that San Jose is 1/3rd the size and estimates the population to be 2.9 million (around 1 million).
The representative heuristic deals with how similar one example is to another. It has more to do with the memories of preconceived stereotypes, prototypes, and averages that a person witnesses.
Representativeness Heuristic Example
One of the most commonly cited examples is the riddle of 'Linda the bank teller' provided by Kahneman and Tversky.
The riddle goes as follows:
"Linda is a 31-year-old single, bright, and outspoken individual who majored in economics. She is also passionate about the issues of equality and discrimination. So what is more likely, Linda works at a bank, or Linda works at a bank and is active in the feminist movement."
Most people tend to pick the second option as it is common to see that people who are passionate about such issues are also active in the feminist movements. However, the first option is the more probable one.
As the second option is simply a subset of the first one, basic probability dictates that Linda, a bank teller, is more probable. In this situation, people use preconceived stereotypes to judge an event's likelihood, even though it may be contrary to the actual probability.
Similarly, another experiment conducted by the same researchers tells people about Tom, who was described as a nerd and someone who likes to build things and play video games. People were asked to guess whether he was an engineering or psychology major.
While most people guessed he was an engineering major, as those attributes were associated with engineers, the probability would have dictated he was more likely to be a psychology major.
Thus, the preconceived notions and stereotypes caused people to see the information given to be more representative of their preconceived notions and hence go for that stereotype and make irrational decisions.
Why does representativeness heuristics occur
There are a variety of factors that may contribute to this cognitive bias. While it may be difficult to pinpoint what causes it, it is likely to be a combination of all of these factors:
1. Limited cognitive resources
Kahneman estimated that people have to make over 35,000 decisions each day. Thus, our brains subconsciously try to make decisions while conserving energy and time, often using shortcuts like existing mental prototypes.
2. Mental prototypes
Grouping and categorizing things together is essential in daily life. However, people often make assumptions about what the average individual of a category looks like, often called a prototype. Then, while making decisions, people use this prototype to generalize the entire type, leading to stereotypes.
3. Overestimating the importance of similarities
People often don't consider that representativeness has nothing to do with probability. Just because an event represents what a person has experienced before doesn't mean it will necessarily repeat.
What makes an event likely is the sample sizes and base rates, which individuals often do not consider while making decisions, leading to irrational decisions.
Effects of Representativeness Heuristics
We frequently ignore other types of information because we tend to rely on representativeness, which can lead to errors.
Due to this heuristic's widespread use, researchers have linked it to other cognitive biases, such as the conjunction fallacy and the gambler's fallacy.
Socially, the representativeness heuristic can support discrimination that is standardized and based on prejudice. We often end up using stereotypes to form judgments about other people because we rely on categories and prototypes to inform how we perceive others.
Thus, some effects of this bias in different areas of life are as follows:
1. Judicial system
Jurors' conclusions regarding guilt may depend on the degree to which a defendant resembles their ideal "guilty" suspect or the degree to which the offense accurately represents a particular crime category.
2. Stereotypes
Because people are so prone to using prototypes as a basis for judgment, this can result in issues like discrimination.
People's mental models might turn into stereotypes, causing them to judge other people unfairly. Such prejudice against various groups of individuals might also result from stereotypes.
For example, the frequent portrayal of a particular race in crime in mass media like movies and TV shows may lead to prejudice that an average person of that race is a criminal. However, This will statistically be false.
Representational Heuristics in Finance
In finance, representativeness heuristics can lead to people making many poor choices.
One example of this bias is seen in predicting the future by forecasting past trends.
Growth in a particular company may be taken by many as representative of its development in the future. However, its growth in the past doesn't guarantee the likelihood of similar growth in the future too.
Similarly, people may see specific patterns before events, like a significant fall in the market, and, upon seeing similar patterns, assume another fall is coming. They may panic and sell after seeing the pattern again, even though probability may dictate that there won't be another fall.
Lastly, individuals often assume that just because a company has solid fundamentals and is a good company, it is indicative of its investments. However, a company that is excellent in its business should not be translated into a high likelihood that it will make great investments.
Protecting against the Representativeness Heuristic
For investors, it may be helpful to maintain an investment diary to note down the reasonings behind investments and then match them with the outcomes helping avoid various biases.
Another way to avoid this bias is to 'think like statisticians. By thinking about the probability of an event more, people can avoid becoming a victim of bias. Some more ways to prevent this bias are as follows.
1. Awareness
According to Kahneman, people may self-correct and make more accurate decisions when they become aware that they are applying the representativeness heuristic. Thus, simply knowing about this bias can reduce the number of poor choices people make.
2. Reflecting on judgments
Spend a moment considering how bias might be influencing your decisions as you make judgments about others or events. By analyzing one's decision, people may be able to pinpoint whether they are affected by the bias and to what degree their decisions are skewed.
3. Applying logic
Aim to approach problems logically as you solve them. Learning more about logical fallacies and critical thinking techniques might also be beneficial.
4. Feedback
It may be challenging to recognize representativeness heuristics in your thinking, so getting input from others can occasionally be helpful. Ask them to look for any potential biases as you explain your reasoning. As different people may have various prototypes, getting others' opinions while making decisions may be helpful.
Representativeness Heuristic FAQs
The availability heuristic refers to the practice of making decisions depending on how readily accessible instances are in your head.
Meanwhile, people can recognize connected traits of an object or a person by using their existing recollections, known as a representativeness heuristic.
Representativeness has more to do with the memory of a template, stereotype, or average, whereas availability has more to do with remembering unique examples.
Prototypes are frequently used as criteria for judgment, leading to problems like prejudice. Stereotypes can emerge from people's mental models, causing them to misjudge others. Stereotypes may also contribute to bias against diverse groups of people.
The riddles about Laura the bank teller or identifying the education of Tom W. mentioned earlier in the article are examples of representativeness heuristics.
Similarly, if people are asked whether Jimmy is a farmer or a librarian, based on the information that he is shy and withdrawn, most people are likely to pick he is a librarian. However, statistically, Jimmy is more likely to be a farmer simply because there are more farmers, making it the more likely profession.
This is an example of representativeness heuristics, as people let their prototype of a librarian or a farmer influence their decisions.
Marketers can use the prototypes in people's minds to their advantage. For example, seeing a particular association in media may create stereotypes in people's minds. For instance, constantly seeing a pickup truck used by a rugged man in ads may negatively or positively influence a person's perception of a pickup truck.
Researched and authored by Soumil De | LinkedIn
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