Base-rate neglect: two psychological mechanisms

Base-rate neglect is among the most robust departures from Bayesian belief updating, yet existing evidence has treated it as a unitary phenomenon. We show that behavior commonly interpreted as base-rate neglect can arise from two fundamentally different cognitive mechanisms: neglecting prior probabilities altogether (the Uniform Prior Fallacy) and conflating conditional and unconditional probabilities (the Fallacy of the Transposed Conditional). We develop and estimate an extension of the canonical Grether (1980) framework able to disentangle these mechanisms and identify heterogeneous belief‐updating types.

Ro’i Zultan's homepage: https://tzin.bgu.ac.il/~zultan