Lay understanding of probability distributions

Abstract

AbstractHow accurate are laypeople’s intuitions about probability distributions of events? The economic and psychological literatures provide opposing answers. A classical economic view assumes that ordinary decision makers consult perfect expectations, while recent psychological research has emphasized biases in perceptions. In this work, we test laypeople’s intuitions about probability distributions. To establish a ground truth against which accuracy can be assessed, we control the information seen by each subject to establish unambiguous normative answers. We find that laypeople’s statistical intuitions can be highly accurate, and depend strongly upon the elicitation method used. In particular, we find that eliciting an entire distribution from a respondent using a graphical interface, and then computing simple statistics (such as means, fractiles, and confidence intervals) on this distribution, leads to greater accuracy, on both the individual and aggregate level, than the standard method of asking about the same statistics directly.