Decisions from Experience and the Effect of Rare Events in Risky Choice
Ralph Hertwig, Greg Barron, Elke Weber and Ido Erev separate decisions from description, such as those based on weather forecasts or drug labels, from decisions from experience, such as deciding whether to cross a busy street. Prospect theory predicts that people overweight rare events when deciding from descriptions. The authors found the opposite when people decide from experience: they behave as if they underweight rare events. They tested two possible causes, reliance on small samples and extra weight on recently observed outcomes, and conclude that the two kinds of decision may require separate theories of risky choice.
Ralph Hertwig, Greg Barron, Elke Weber and Ido Erev separate decisions from description, such as those based on weather forecasts or drug labels, from decisions from experience, such as deciding whether to cross a busy street. Prospect theory predicts that people overweight rare events when deciding from descriptions. The authors found the opposite when people decide from experience: they behave as if they underweight rare events. They tested two possible causes, reliance on small samples and extra weight on recently observed outcomes, and conclude that the two kinds of decision may require separate theories of risky choice.
Written from the abstract read 2026-10-22 via the Columbia Business School and University of Basel records.
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Hertwig, R., Barron, G., Weber, E. U., & Erev, I. (2004). Decisions from Experience and the Effect of Rare Events in Risky Choice. Psychological Science, 15(8), 534-539. doi:10.1111/j.0956-7976.2004.00715.x