Daniel Kahneman / Amos Tversky

Thinking, Fast and Slow

by Daniel Kahneman  · 24 Oct 2011  · 654pp  · 191,864 words

to be judged by how it was made, not only by how it turned out. Appendix A: Judgment Under Uncertainty: Heuristics and Biases* Amos Tversky and Daniel Kahneman Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or

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Encyclopedia of the Social Sciences, ed. D. E. Sills, vol. 12 (New York: Macmillan, 1968), 496–505. Appendix B: Choices, Values, And Frames* Daniel Kahneman and Amos Tversky ABSTRACT: We discuss the cognitive and the psychophysical determinants of choice in risky and riskless contexts. The psychophysics of value induce risk aversion in the

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. Princeton: Princeton University Press. Also by Daniel Kahneman International Differences in Well-B f, aisan (written with Ed Diener and John F. Helliwell) Heuristics and Biases: The Psychology of Intuitive Judgment (edited with Thomas Gilovich and Dale Griffin) Choices, Values, and Frames (edited with Amos Tversky) Well-Being: The Foundations of Hedonic Psychology

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,” European Review of Social Psychology 2 (1991): 83–115. Gerd Gigerenzer, “Personal Reflections on Theory and Psychology,” Theory & Psychology 20 (2010): 733–43. Daniel Kahneman and Amos Tversky, “On the Reality of Cognitive Illusions,” Psychological Review 103 (1996): 582–91. offered plausible alternatives: Some examples from many are Valerie F. Reyna and Farrell

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memory space and slows thinking. I will do my best to use participant whenever possible but will switch to subject when necessary. heart rate increases: Daniel Kahneman et al., “Pupillary, Heart Rate, and Skin Resistance Changes During a Mental Task,” Journal of Experimental Psychology 79 (1969): 164–67. rapidly flashing

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letters: Daniel Kahneman, Jackson Beatty, and Irwin Pollack, “Perceptual Deficit During a Mental Task,” Science 15 (1967): 218–19. We used a halfway mirror so that the

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Randall W. Engle, “Working Memory Capacity and Its Relation to General Intelligence,” Trends in Cognitive Sciences 7 (2003): 547–52. Israeli Air Force pilots: Daniel Kahneman, Rachel Ben-Ishai, and Michael Lotan, “Relation of a Test of Attention to Road Accidents,” Journal of Applied Psychology 58 (1973): 113–15. Daniel Gopher

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Test as a Predictor of Performance on Heuristics-and-Biases Tasks,” Memory & Cognition (in press). 4: The Associative Machine Associative Machine: Carey K. Morewedge and Daniel Kahneman, “Associative Processes in Intuitive Judgment,” Trends in Cognitive Sciences 14 (2010): 435–40. beyond your control: To avoid confusion, I did not mention in

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of Intuition: Processing Fluency and Affect in Judgments of Semantic Coherence,” Cognition and Emotion 23 (2009): 1465–1503. 6: Norms, Surprises, and Causes An observer: Daniel Kahneman and Dale T. Miller, “Norm Theory: Comparing Reality to Its Alternatives,” Psychological Review 93 (1986): 136–53. “tattoo on my back”: Jos J. A.

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the Part: Television Leads Less Informed Citizens to Vote Based on Candidates’ Appearance,” American Journal of Political Science (forthcoming). absence of a specific task set: Amos Tversky and Daniel Kahneman, “Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment,” Psychological Review 90 (1983): 293–315. Exxon Valdez: William H. Desvousges et al.,

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of Abnormal-Social Psychological Research: A Review,” Journal of Abnormal and Social Psychology 65 (1962): 145–53. “Belief in the Law of Small Numbers”: Amos Tversky and Daniel Kahneman, “Belief in the Law of Small Numbers,” Psychological Bulletin 76 (1971): 105–10. “statistical intuitions…whenever possible”: The contrast that we drew between intuition

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a conclusion. German spies: William Feller, Introduction to Probability Theory and Its Applications (New York: Wiley, 1950). randomness in basketball: Thomas Gilovich, Robert Vallone, and Amos Tversky, “The Hot Hand in Basketball: On the Misperception of Random Sequences,” Cognitive Psychology 17 (1985): 295–314. 11: Anchors “‘reasonable’ volume”: Robyn Le Boeuf

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Exemplar Knowledge in the Solution of Anchoring Tasks,” Journal of Personality and Social Psychology 78 (2000): 1038–52. San Francisco Exploratorium: Karen E. Jacowitz and Daniel Kahneman, “Measures of Anchoring in Estimation Tasks,” Person {pantion ality and Social Psychology Bulletin 21 (1995): 1161–66. substantially lower: Gregory B. Northcraft and Margaret

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. Wistrich, “Judging by Heuristic-Cognitive Illusions in Judicial Decision Making,” Judicature 86 (2002): 44–50. 12: The Science of Availability “the ease with which”: Amos Tversky and Daniel Kahneman, “Availability: A Heuristic for Judging Frequency and Probability,” Cognitive Psychology 5 (1973): 207–32. self-assessed contributions: Michael Ross and Fiore Sicoly, “Egocentric Biases

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in Judgments of Risks and Benefits.” Paul Slovic, Melissa Finucane, Ellen Peters, and Donald G. MacGregor, “The Affect Heuristic,” in Thomas Gilovich, Dale Griffin, and Daniel Kahneman, eds., Heuristics and Biases (New York: Cambridge University Press, 2002), 397–420. Paul Slovic, Melissa Finucane, Ellen Peters, and Donald G. MacGregor, “Risk as

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Tom W being a computer scientist is now 11% (because 12.4/112. 4 = .11). 15: Linda: Less is More the role of heuristics: Amos Tversky and Daniel Kahneman, “Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment,” Psychological Review 90(1983), 293-315. “a little homunculus”: Stephen Jay Gould, Bully for

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and Stefan Krauss, “The Conjunction Fallacy and the Many Meanings of And,” Cognition 108 (2008): 740–53. settle our differences: Barbara Mellers, Ralph Hertwig, and Daniel Kahneman, “Do Frequency Representations Eliminate Conjunction Effects? An Exercise in Adversarial Collaboration,” Psychological Science 12 (2001): 269–75. 16: Causes Trump Statistics correct answer is 41

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Blue, we compute: Probability (Blue) = .706/1. 706 = .41. The probability that the cab is Blue is 41%. not too far from the Bayesian: Amos Tversky and Daniel Kahneman, “Causal Schemas in Judgments Under Uncertainty,” in Progress in Social Psychology, ed. Morris Fishbein (Hillsdale, NJ: Erlbaum, 1980), 49–72. University of Michigan: Richard

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which are not even close to what we had in mind. very different answers: Dan Lovallo and Daniel Kahneman, “Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking,” Management Science 39 (1993): 17–31. Daniel Kahneman and Dan Lovallo, “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review 81 (

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Social Judgment (Englewood Cliffs, NJ: Prentice-Hall, 1980). impersonality of procedures: Fo {i>How Doctors Think (New York: Mariner Books, 2008), 6. planning fallacy: Daniel Kahneman and Amos Tversky, “Intuitive Prediction: Biases and Corrective Procedures,” Management Science 12 (1979): 313–27. Scottish Parliament building: Rt. Hon. The Lord Fraser of Carmyllie, “The Holyrood

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10. “loss aversion ratio”: The loss aversion ratio is often found to be in the range of 1. 5 and 2.5: Nathan Novemsky and Daniel Kahneman, “The Boundaries of Loss Aversion,” Journal of Marketing Research 42 (2005): 119–28. emotional reaction to losses: Peter Sokol-Hessner et al., “Thinking

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What is missing from the figure: A theoretical analysis that assumes loss aversion predicts a pronounced kink of the indifference curve at the reference point: Amos Tversky and Daniel Kahneman, “Loss Aversion in Riskless Choice: A Reference-Dependent Model,” Quarterly Journal of Economics 106 (1991): 1039–61. Jack Knetsch observed these kinks in

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Research 42 (2005): 129–33. Colin F. Camerer, “Prospect Theory in the Wild: Evidence from the Field,” in Choices, Values, and Frames, ed. Daniel Kahneman and Amos Tversky (New York: Russell Sage Foundation, 2000), 288–300. condo apartments in Boston: David Genesove and Christopher Mayer, “Loss Aversion and Seller Behavior: Evidence from the

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, “Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment,” American Economic Review 97 (2007): 298–317. communicate a reference point: Daniel Kahneman, “Reference Points, Anchors, Norms, and Mixed Feelings,” Organizational Behavior and Human Decision Processes 51 (1992): 296–312. “wins the contest”: John Alcock, Animal Behavior:

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cited by Eyal Zamir, “Law and Psychology: The Crucial Role of Reference Points and Loss Aversion,” working paper, Hebrew University, 2011. merchants, employers, and landlords: Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Fairness as a Constraint on Profit Seeking: Entitlements in the Market,” The American Economic Review 76 (1986): 728

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. Hart and Tony Honoré, Causation in the Law (New York: Oxford University Press, 1985), 33. remarkably uniform: Daniel Kahneman and Amos Tversky, “The Simulation Heuristic,” in Judgment Under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky (New York: Cambridge University Press, 1982), 160–73. applies to blame: Janet Landman, “Regret and Elation Following

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Andreas Herrmann, “Exploring the Nature of Loss Aversion,” Centre for Decision Research and Experimental Economics, University of Nottingham, Discussion Paper Series, 2006. Edward J. McCaffery, Daniel Kahneman, and Matthew L. Spitzer, “Framing the Jury: Cognitive Perspectives on Pain and Suffering,” Virginia Law Review 81 (1995): 1341–420. classic on consumer behavior:

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of dolphins: There is evidence that questions about the emotional appeal of species and the willingness to contribute to their protection yield the same rankings: Daniel Kahneman and Ilana Ritov, “Determinants of Stated Willingness to Pay for Public Goods: A Study in the Headline Method,” Journal of Risk and Uncertainty 9

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Schkade, and Ilana Ritov, “Predictably Incoherent Judgments,” Stanford Law Review 54 (2002): 1190. 34: Frames and Reality unjustified influences of formulation: Amos Tversky and Daniel Kahneman, “The Framing of Decisions and the Psychology of Choice,” Science 211 (1981): 453–58. paid with cash or on credit: Thaler, “Toward a Positive

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Theory of Consumer Choice.” 10% mortality is frightening: Barbara McNeil, Stephen G. Pauker, Harold C. Sox Jr., and Amos Tversky, “On the Elicitation of Preferences for Alternative

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to Denote?” American Economic Review 8 (1918): 335. at any moment: Francis Edgeworth, Mathematical Psychics (New York: Kelley, 1881). under which his theory holds: Daniel Kahneman, Peter P. Wakker, and Rakesh Sarin, “Back to Bentham? Explorations of Experienced Utility,” Quarterly Journal of Economics 112 (1997): 375–405

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. Daniel Kahneman, “Experienced Utility and Objective Happiness: A Moment-Based Approach” and “Evaluation by Moments: Past and Future,” in Kahneman and Tversky, Choices, Values, and Frames,

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673–92, 693–708. a physician and researcher: Donald A. Redelmeier and Daniel Kahneman, “Patients’ Memories of Painful Medical Treatments: Real-time and Retrospective Evaluations of Two Minimally Invasive Procedures,” Pain 66 (1996): 3–8. free to choose

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: Daniel Kahneman, Barbara L. Frederickson, Charles A. Schreiber, and Donald A. Redelmeier, “When More Pain Is Preferred to Less: Adding a Better End,” Psychological Science 4 (

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stimulation: Peter Shizgal, “On the Neural Computation of Utility: Implications from Studies of Brain Stimulation Reward,” in Well-Being: The Foundations of Hedonic Psychology, ed. Daniel Kahneman, Edward Diener, and Norbert Schwarz (New York: Russell Sage Foundation, 1999), 500–24. 36: Life as a Story had a lover: Paul Rozin and

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been one of several Senior Scientists associated with the efforts of the Gallup Organization in the domain of well-being. more than 450,000 responses: Daniel Kahneman and Angus Deaton, “High Income Improves Evaluation of Life but Not Emotional Well-Being,” Proceedings of the National Academy of Sciences 107 (2010): 16489

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Research in Higher Education, 1976. money was not important: These results were presented in a talk at the American Economic Association annual meeting in 2004. Daniel Kahneman, “Puzzles of Well-Being,” paper presented at the meeting. happiness of Californians: The question of how well people today can forecast the feelings of

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also predicts people’s pleasure during joyrides. But the quality of the car has no effect on people’s mood during normal commutes. Norbert Schwarz, Daniel Kahneman, and Jing Xu, “Global and Episodic Reports of Hedonic Experience,” in R. Belli, D. Alwin, and F. Stafford (eds.), Using Calendar and Diary

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in Social Cognition, ed. Joseph P. Forgas (New York: Cambridge University Press, 2000), 178–97. Conclusions too important to be ignored: Paul Dolan and Daniel Kahneman, “Interpretations of Utility and Their Implications for the Valuation of Health,” Economic Journal 118 (2008): 215–234. Loewenstein and Ubel, “Hedonic Adaptation and the Role

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(New Haven: Yale University Press, 2008). can institute and enforce: Atul Gawande, The Checklist Manifesto: How to Get Things Right (New York: Holt, 2009). Daniel Kahneman, Dan Lovallo, and Oliver Sibony, “The Big Idea: Before You Make That Big Decision…” Harvard Business Review 89 (2011): 50–60. distinctive vocabulary: Chip Heath

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18th Street, New York 10011 Copyright © 2011 by Daniel Kahneman All rights reserved Grateful acknowledgment is made for permission to reprint the following previously published material: “Judgment Under Uncertainty: Heuristics and Biases” from Science, New Series, Vol. 185, No. 4157, copyright © 1974 by Amos Tversky and Dan"0%" te>X-rays Science. “Choices

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, Values, and Frames” from The American Psychologist, copyright © 1983 by Daniel Kahneman and Amos Tversky. Reprinted by permission of the American Psychological Association. Grateful acknowledgment is made for permission to reprint

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Whalen et al., Science 306 (2004). Reprinted by permission of Science. Library of Congress Cataloging-in-Publication Data Kahneman, Daniel, 1934– Thinking, fast and slow / Daniel Kahneman.—1st ed. p. cm. Includes bibliographical references and index. ISBN: 978-0-3742-7563-1 1. Thought and thinking. 2. Decision making. 3. Intuition.

Fixed: Why Personal Finance is Broken and How to Make it Work for Everyone

by John Y. Campbell and Tarun Ramadorai  · 25 Jul 2025

C. Madrian, and William L. Skimmyhorn, “Financial literacy, financial education, and economic outcomes,” Annual Review of Economics 5 (2013): 347–373. 8. Economics Nobel laureate Daniel Kahneman calls overconfidence “the most significant of the cognitive biases” in his book Thinking, Fast and Slow (Farrar, Straus, and Giroux, 2013). Garrison Keillor satirizes it

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): 416–422. 12. This observation is part of the famous research on cognitive biases by Daniel Kahneman and Amos Tversky. See Amos Tversky and Daniel Kahneman, “Belief in the law of small numbers,” Psychological Bulletin 76, no. 2 (1971): 105–110, and Daniel Kahneman and Amos Tversky, “Subjective probability: A judgment of representativeness,” Cognitive Psychology 3, no. 3 (1972): 430–454. See

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Presbyterian minister. Bayesian reasoning is at the heart of rational thinking in the face of uncertainty. 17. This is another of the seminal contributions of Daniel Kahneman and Amos Tversky. See Kahneman and Tversky, “On the psychology of prediction,” Psychological Review 80, no. 4 (1973): 237–251. 18. See David Silver, Julian Schrittwieser, Karen

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losses imposes severe disutility on individuals, a finding that has been reinforced in large-scale field evidence. See Daniel Kahneman and Amos Tversky, “Prospect theory: An analysis of decision under risk,” Econometrica 47 (1979): 262–292, and Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Anomalies: The endowment effect, loss aversion, and status quo bias

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way a modest cost of taking action can generate protracted delay and a low participation rate. 7. The classic work on this effect is by Daniel Kahneman and Amos Tversky, “Prospect theory: An analysis of decision under risk,” Econometrica 47 (1979): 263–291. Kahneman and Tversky’s prospect theory gives the status quo (the

The Undoing Project: A Friendship That Changed Our Minds

by Michael Lewis  · 6 Dec 2016  · 336pp  · 113,519 words

any expert’s judgments might be warped by the expert’s own mind—had been described, years ago, by a pair of Israeli psychologists, Daniel Kahneman and Amos Tversky. My book wasn’t original. It was simply an illustration of ideas that had been floating around for decades and had yet to be fully

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high, rubber-soled boots and crisp uniform and red beret of the Israeli paratrooper. The new Spartan. Then he started to speak. His name was Amos Tversky. Amnon wouldn’t remember exactly what he had said but he’d remember, vividly, how he’d felt about it. “I was not as smart

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as he was. I understood it immediately.” * * * To his fellow Israelis, Amos Tversky somehow was, at once, the most extraordinary person they had ever met and the quintessential Israeli. His parents were among the pioneers who had fled

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to learn about this new field of decision making in the United States and then return to Israel and work together. The earliest sightings of Amos Tversky in the United States are anomalies in the History of Amos. In their first week of classes, fellow students saw a silent, seemingly dutiful foreigner

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nothing but equations in it. “It might have had the word donc in it,” said Amos’s roommate Mel Guyer. The University of Michigan declared Amos Tversky proficient in French. Amos wanted to explore how people made decisions. To do this he required subjects who were both captive and poor enough that

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a problem. To each new class the students arrived wondering what problem he might bring for them to solve. Then one day he brought them Amos Tversky. 5 THE COLLISION Danny and Amos had been at the University of Michigan at the same time for six months, but their paths seldom crossed

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. “We thought he was afraid of us or something,” said Amnon. “Suspicious of us.” For his part, Danny said he’d simply been curious about Amos Tversky. “I think I wanted a chance to know him better,” he said. Danny invited Amos to come to his seminar to talk about whatever he

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in his judgments, we should thereby increase the validity of the resulting predictions . . .” Right after Goldberg published those words, late in the summer of 1970, Amos Tversky showed up in Eugene, Oregon. He was on his way to spend a year at Stanford and wanted to visit his old friend Paul Slovic

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death. “That article was more thrilling than a movie to me,” said Redelmeier. “And I love movies.” Redelmeier had never heard of the authors—Daniel Kahneman and Amos Tversky—though at the bottom of the page it said that they were members of the Department of Psychology at Hebrew University in Jerusalem. To him

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unhappiness, a little dissatisfaction, a sense that all was not right in the state of Denmark.” Toward the end of their article in Science, Daniel Kahneman and Amos Tversky had pointed out that, while statistically sophisticated people might avoid the simple mistakes made by less savvy people, even the most sophisticated minds were prone

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, where I was needed and wanted.” Redelmeier actually still believed that he might wind up practicing medicine in a conventional manner. But then he met Amos Tversky. * * * Redelmeier had long made a habit of anticipating his own mental errors and correcting for them. Alive to the fallibility of his memory, he carried

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and simulated his entire performance. And so, in the spring of 1988, for Redelmeier it felt perfectly normal, two days before his first lunch with Amos Tversky, to walk through the Stanford Faculty Club dining room where they were scheduled to meet. On the day of the lunch, he moved his hospital

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Stanford, who would be joining them, had told Redelmeier, “Don’t talk. Don’t say anything. Don’t interrupt. Just sit and listen.” Meeting with Amos Tversky, Hal Sox, said, was “like brainstorming with Albert Einstein. He is one for the ages—there won’t ever be anyone else like him.” Hal

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would do this he could not immediately say. He was still too unsure of himself. All he knew for sure was that by working with Amos Tversky, he had discovered this other side to himself: a seeker of truth. He wanted to use data to find true patterns in human behavior, to

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an article. But even before he did, he found a mailing address for the Department of Psychology at Hebrew University and wrote a letter to Amos Tversky. * * * It was almost always to Amos that the economists wrote. They understood him. Amos’s insistently logical mind was much like their own but somehow

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said yes! Did I do a good job?’ And Amos would say, ‘Let’s write that up.’” The economists’ view of the collaboration was that Amos Tversky had set out, like an anthropologist, to study an alien tribe of beings less rational than himself, and his tribe was Danny. “I share your

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of physicists” and, after flirting with participating, the British ice dancers Torvill and Dean. Among those who agreed to sit down with Miles Shore were Amos Tversky and Daniel Kahneman. Shore found Danny and Amos together in August 1983, in Anaheim, California, where they were attending the American Psychological Association meeting. Danny was now

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it that we are finished.” * * * In late 1977, after Danny had told him that he wasn’t returning to Israel, word spread through academia that Amos Tversky might leave, too. The job market for college professors typically moves slowly and with great reluctance, but in this instance it leapt into action. It

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effect,’” Amos wrote to the author. “This work has been done in collaboration with my long-time friend and colleague, Daniel Kahneman, so I should not be singled out. In fact, Daniel Kahneman was the one who observed the effect of pilots’ training, so if this phenomenon is to be named after a person

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. By the late 1980s he was behaving like a man caught in some mysterious, invisible trap. Once you had shared a mind with Amos Tversky it was hard to get Amos Tversky out of your mind. What he did, instead, was get Amos out of his sight, by leaving Berkeley for Princeton, in 1992

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breakfast and lunch to which they are entitled. Jason never went hungry, and remained in school. 4) A lawyer steeped in the writings of Amos Tversky and Daniel Kahneman took a federal government job in 2009. Drawing upon Kahneman and Tversky’s work, he pushed for changes in the rules, so that homeless kids

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. His funeral was a blur. It had an unreal feeling to it. The people in attendance could imagine many things, but they had trouble imagining Amos Tversky dead. “Death is unrepresentative of Amos,” said his friend Paul Slovic. Amos’s Stanford colleagues, who had come to think of Danny as a figure

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., R. Duncan Luce, Patrick Suppes, and Amos Tversky. Foundations of Measurement—Vol. I: Additive and Polynomial Representations; Vol. II: Geometrical, Threshold, and Probabilistic Representations; Vol III: Representation, Axiomatization, and Invariance. San Diego and London: Academic Press, 1971–90; repr., Mineola, NY: Dover, 2007. Tversky, Amos, and Daniel Kahneman. “Belief in the Law of Small

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. 2 (1960): 116–31. Kahneman, Daniel, and Amos Tversky. “Subjective Probability: A Judgment of Representativeness.” Cognitive Psychology 3 (1972): 430–54. Meehl, Paul E. “Causes and Effects of My Disturbing Little Book.” Journal of Personality Assessment 50, no. 3 (1986): 370–75. Tversky, Amos, and Daniel Kahneman. “Availability: A Heuristic for Judging Frequency and

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Amos Tversky. “On the Psychology of Prediction.” Psychological Review 80, no. 4 (1973): 237–51. Meehl, Paul E. “Why I Do Not Attend Case Conferences.” In Psychodiagnosis: Selected Papers, edited by Paul E. Meehl, 225–302. Minneapolis: University of Minnesota Press, 1973. CHAPTER 8: GOING VIRAL Redelmeier, Donald A., Joel Katz, and Daniel Kahneman

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. “Memories of Colonoscopy: A Randomized Trial,” Pain 104, nos. 1–2 (2003): 187–94. Redelmeier, Donald A., and Amos Tversky. “Discrepancy between Medical Decisions for Individual Patients and for Groups.” New England Journal of Medicine 322

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of the National Academy of Sciences 93, no. 7 (1996): 2895–96. http://www.pnas.org/content/93/7/2895.full.pdf. Tversky, Amos, and Daniel Kahneman. “Judgment under Uncertainty: Heuristics and Biases.” Science 185 (1974): 1124–31. CHAPTER 9: BIRTH OF THE WARRIOR PSYCHOLOGIST Allais, Maurice. “Le Comportement de l’homme

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: for Econometrica 22, no. 1 (1954): 23–36. See also Savage (1954) and Coombs, Dawes, and Tversky (1970). Coombs, Clyde H., Robyn M. Dawes, and Amos Tversky. Mathematical Psychology: An Elementary Introduction. Englewood Cliffs, NJ: Prentice-Hall, 1970. Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011. The

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University Press, 1944; 2nd ed., 1947. Savage, Leonard J. The Foundations of Statistics. New York: Wiley, 1954. CHAPTER 10: THE ISOLATION EFFECT Kahneman, Daniel, and Amos Tversky. “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47, no. 2 (1979): 263–91. CHAPTER 11: THE RULES OF UNDOING Hobson, J. Allan, and

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(1978): 1211–21. Kahneman, Daniel. “The Psychology of Possible Worlds.” Katz-Newcomb Lecture, April 1979. Kahneman, Daniel, and Amos Tversky. “The Simulation Heuristic.” In Judgment under Uncertainty: Heuristics and Biases, edited by Daniel Kahneman, Paul Slovic, and Amos Tversky, 3–22. Cambridge: Cambridge University Press, 1982. LeCompte, Tom. “The Disorient Express.” Air & Space, September 2008, 38

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–43. http://www.airspacemag.com/military-aviation/the-disorient-express-474780/. Tversky, Amos, and Daniel Kahneman. “The Framing of Decisions and the Psychology of

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and Colin Allen, 9–29. New York: Oxford University Press, 1998. Kahneman, Daniel, and Amos Tversky. “Discussion: On the Interpretation of Intuitive Probability: A Reply to Jonathan Cohen.” Cognition 7, no. 4 (1979): 409–11. Tversky, Amos, and Daniel Kahneman. “Extensional versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment.” Psychological Review 90, no

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late 1990s, by bizarre coincidence, I taught, or attempted to teach, her son Oren. As I was unaware of the existence of Amos Tversky, I was unaware that he was Amos Tversky’s son. Anyway, I went to Barbara bearing a character reference from my former pupil. Barbara gave me access to Amos’s

Misbehaving: The Making of Behavioral Economics

by Richard H. Thaler  · 10 May 2015  · 500pp  · 145,005 words

social science from the principles of psychology. —VILFREDO PARETO, 1906 PREFACE Before we get started, here are two stories about my friends and mentors, Amos Tversky and Daniel Kahneman. The stories provide some hints about what to expect in this book. Striving to please Amos Even for those of us who can’t remember

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one I know precisely where I was standing. It was early 1996 and Danny had called to share the news that his friend and collaborator Amos Tversky was ill with terminal cancer and had about six months to live. I was so discombobulated that I had to hand the phone to my

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wife while I recovered my composure. The news that any good friend is dying is shocking, but Amos Tversky was just not the sort of person who dies at age fifty-nine. Amos, whose papers and talks were precise and perfect, and on whose

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had completed a PhD in psychology at the Hebrew University in Israel. There he had worked with two guys whose names I had never heard: Daniel Kahneman and Amos Tversky. Baruch told me about his now-famous thesis on “hindsight bias.” The finding is that, after the fact, we think that we always knew

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; I was given the intimidating task of acting as the discussant for a set of three papers authored respectively by Herbert Simon, Danny Kahneman with Amos Tversky, and Hillel Einhorn with Robin Hogarth (the conference organizer). In this situation, I largely agreed with what the authors had said, so I was not

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the field. The initial members of the Roundtable were George Akerlof, Alan Blinder, Colin Camerer, Jon Elster, Danny Kahneman, George Loewenstein, Tom Schelling, Bob Shiller, Amos Tversky, and me, and within reason, we could spend the money we were given any way we wanted. The Roundtable members decided that the most useful

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. “Progress in Behavioral Game Theory.” Journal of Economic Perspectives 11, no. 4: 167–88. ———. 2000. “Prospect Theory in the Wild: Evidence from the Field.” In Daniel Kahneman and Amos Tversky, eds., Choices, Values, and Frames. Cambridge, UK: Cambridge University Press. ———. 2003. Behavioral Game Theory: Experiments in Strategic Interaction. Princeton: Princeton University Press. ———, Teck-Hua

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, and Dan Lovallo. 1993. “Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking.” Management Science 39, no. 1: 17–31. Kahneman, Daniel, and Amos Tversky. 1973. “On The Psychology of Prediction.” Psychological Review 80, no. 4: 237. ———. 1979. “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47, no. 2

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Economic Review: Papers and Proceedings 93, no. 2: 175–9. ———. 2008. Nudge: Improving Decisions about Health, Wealth, and Happiness. New Haven, CT: Yale University Press. ———, Amos Tversky, Daniel Kahneman, and Alan Schwartz. 1997. “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test.” Quarterly Journal of Economics 112, no. 2: 647

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, January 26. Available at: http://business.time.com/2012/01/26/in-major-shakeup-j-c-penney-promises-no-more-fake-prices/. Tversky, Amos, and Daniel Kahneman. 1974. “Judgment under Uncertainty: Heuristics and Biases.” Science 185, no. 4157: 1124–31. UK Department for Works and Pensions. 2014. “Automatic Enrolment Opt Out Rates

The Science of Fear: How the Culture of Fear Manipulates Your Brain

by Daniel Gardner  · 23 Jun 2009  · 542pp  · 132,010 words

. The implications of this new science were enormous for a whole range of different fields. In 2002, one of the major figures in this research, Daniel Kahneman, won the Nobel Prize in economics, even though Kahneman is a psychologist who never took so much as a single class in economics. What the

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, which slowly and deliberately adjusts them.” Standing on a wide plain and looking at a mountain in the distance—to use an illustration devised by Daniel Kahneman—you will have an intuitive sense of how far away the mountain is. Where did that intuition come from? What is it based on? You

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still be higher than it would have been if that figure hadn’t been handed to Gut. In a study that did precisely this, psychologists Daniel Kahneman and Jack Knetsch found that the average guess about how much people would be willing to pay to clean up the lake was $36. But

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breakthrough with vast implications. As always in science, there are many authors and origins of this burgeoning field, but two who stand out are psychologists Daniel Kahneman and Amos Tversky. Four decades ago, Kahneman and Tversky collaborated on research that looked at how people form judgments when they’re uncertain of the facts. That

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is not Homo economicus, and a dynamic new field called “behavioral economics” is devoted to bringing the insights of psychology to economics. Amos Tversky died in 1996. In 2002, Daniel Kahneman experienced the academic equivalent of a conquering general’s triumphal parade: He was awarded the Prize in Economic Sciences in Memory of Alfred

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no sense, but “terrorist acts” is a vivid phrase dripping with bad feelings, while “all possible causes” is bland and empty. It leaves Gut cold. Amos Tversky and psychologist Eric Johnson also showed that the influence of bad feelings can extend beyond the thing generating the feelings. They asked Stanford University students

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surprising that the words a doctor chooses can be even more influential than those used in Levin and Gaeth’s experiment. A 1982 experiment by Amos Tversky and Barbara McNeil demonstrated this by asking people to imagine they were patients with lung cancer who had to decide between radiation treatment and surgery

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dying, that dropped to 18 percent. Tversky and McNeil repeated this experiment with physicians and got the same results. In a different experiment, Tversky and Daniel Kahneman also showed that when people were told a flu outbreak was expected to kill 600 people, people’s judgments about which program should be implemented

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all. It’s a cup filled nearly to overflowing. And so we find saving 98 percent of 150 lives more compelling than saving 150 lives. Daniel Kahneman and Amos Tversky underscored the impotence of statistics in a variation of the famous “Linda” experiment. First, people were asked to read a profile of a man

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, thick clusters of dots will form in some spots while other portions of the paper will be dot-free. Misperceptions of randomness can be tenacious. Amos Tversky, Tom Gilovich, and Robert Vallone famously analyzed basketball’s “hot hand”— the belief that a player who has sunk his last two, three, or four

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System One [Gut] thinking and the importance of images to which positive feelings are attached. And that was the basis of all of their advertising.” Amos Tversky once joked that he and other scientists investigating how people make decisions were merely catching up with “advertisers and used car salesmen.” He had no

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were run today, psychologists might see it as proof that spin doctors were learning from their work, but the truth is that spin doctors—like Amos Tversky’s “advertisers and used car salesmen”—figured it out first. Of course, it’s not hard for most people to believe that spin doctors traffic

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spiral of anxiety. And the effect of fear-saturated media may not be limited to our feelings about crime. Recall the experiment conducted by psychologists Amos Tversky and Eric Johnson in which they asked Stanford University students to read a tragic story of a death caused by leukemia, fire, or murder and

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scenario to judge the likelihood of the whole scenario. “This effect contributes to the appeal of scenarios and the illusory insight that they often provide,” Daniel Kahneman and Amos Tversky wrote more than thirty years ago. “A political analyst can improve scenarios by adding plausible causes and representative consequences,” Kahneman and Tversky added. And

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the unconscious mind. What we can do is understand how Gut works and how it sometimes makes mistakes. “People are not accustomed to thinking hard,” Daniel Kahneman wrote, “and are often content to trust a plausible judgment that quickly comes to mind.” That is the most important change that has to be

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and others that follow, this is drawn from Heuristics and Biases, edited by Thomas Gilovich, Dale Griffin, and Daniel Kahneman. Along with the earlier edition of the same work—edited by Paul Slovic, Amos Tversky, and Daniel Kahneman—it is the definitive text on the subject. 30: “. . . if you give it some careful thought . . . .” The answer

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laws of physics. Neither do invisible rabbits.” Bibliography ESSENTIAL READING Gilovich, Thomas, Dale Griffin, and Daniel Kahneman (eds.), Heuristics and Biases: The Psychology of Intuitive Judgment, Cambridge University Press, New York, 2002. Kahneman, Daniel, Paul Slovic, and Amos Tversky (eds.), Judgment Under Uncertainty: Heuristics and Biases, Cambridge University Press, New York, 1982. Lichtenstein, Sarah

How Big Things Get Done: The Surprising Factors Behind Every Successful Project, From Home Renovations to Space Exploration

by Bent Flyvbjerg and Dan Gardner  · 16 Feb 2023  · 353pp  · 97,029 words

real goal of strategic misrepresentation. It is politics, resulting in failure by design. A second is psychology. In 2003, I had a spirited debate with Daniel Kahneman, a Nobel laureate and arguably the most influential living psychologist, in the pages of the Harvard Business Review after he co-wrote an article pinning

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or organizations, no politics of any kind. The closer a project is to that situation, the more individual psychology will dominate, which is what Kahneman, Amos Tversky, and other behavioral scientists have found. But as projects get bigger and decisions more consequential, the influence of money and power grows. Powerful individuals and

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chance of making a good forecast; use a bad anchor, get a bad forecast. Unfortunately, it is easy to settle on a bad anchor. Daniel Kahneman and Amos Tversky pioneered research on this in a famous 1974 paper that included one of the stranger experiments in the history of psychology. They created a “wheel

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plus strategic misrepresentation equals trouble—was relatively easy. Finding a cure was more work. I started with an obscure phrase found within a paper that Daniel Kahneman and Amos Tversky published in 1979—not the famous 1979 paper on “prospect theory” that won Kahneman the Nobel Prize in Economic Sciences in 2002 but another

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. A 50 percent increase in accuracy is common. Improvements of more than 100 percent are not uncommon. Most gratifyingly, given the method’s intellectual roots, Daniel Kahneman wrote in Thinking, Fast and Slow that using reference-class forecasting is “the single most important piece of advice regarding how to increase accuracy in

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portfolio of projects, Hirschman’s argument just doesn’t hold up. These conclusions are overwhelmingly supported by logic and evidence, including the main findings of Daniel Kahneman and behavioral science. Simply put, if Kahneman is right, Hirschman is wrong. Kahneman identified optimism bias as “the most significant of the cognitive biases.”14

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Risk: An Anatomy of Ambition (Cambridge, UK: Cambridge University Press, 2003), https://amzn.to/3ELjq4R. Bent Flyvbjerg, “Delusions of Success: Comment on Dan Lovallo and Daniel Kahneman,” Harvard Business Review 81, no. 12 (December 2003): 121–22, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2278359. Bent Flyvbjerg, Mette K. Skamris

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a big team, so undoubtedly I forgot some, for which I ask forgiveness, but which does not lessen their contribution or my gratitude. Gerd Gigerenzer, Daniel Kahneman, Benoit Mandelbrot, and Nassim Nicholas Taleb are principal intellectual influences. Nobody understands risk better than they do, and understanding risk is the key to understanding

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-Georg Gemünden, Gerd Gigerenzer, Edward Glaeser, Carsten Glenting, Tony Gómez-Ibáñez, The Right Honourable The Lord Hardie, Martina Huemann, Sir Bernard Jenkin, Hans Lauritz Jørgensen, Daniel Kahneman, Mark Keil, Mike Kiernan, Thomas Kniesner, Jonathan Lake, Edgardo Latrubesse, Richard LeBlanc, Jong Seok Lee, Zhi Liu, Dan Lovallo, Gordon McNicoll, Edward Merrow, Ralf Müller

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(March 1991): 419–34; Ana Guinote and Theresa K. Vescio, eds., The Social Psychology of Power (New York: Guilford Press, 2010). 6. Dan Lovallo and Daniel Kahneman, “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review 81, no. 7 (July 2003), 56–63; Bent Flyvbjerg, “Delusions of Success: Comment on

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Dan Lovallo and Daniel Kahneman,” Harvard Business Review 81, no. 12 (December 2003): 121–22. 7. In his 2011 bestseller, Thinking, Fast and Slow, Kahneman would write, “Errors in the

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innocent per definition, but of political bias, specifically strategic misrepresentation aimed at getting projects under way. For a more full account of my discussions with Daniel Kahneman about power bias and strategic misrepresentation, see Flyvbjerg, “Top Ten Behavioral Biases in Project Management.” 8. Flyvbjerg, “Top Ten Behavioral Biases in Project Management.” 9

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expected in terms of benefits and costs. See Tali Sharot, The Optimism Bias: A Tour of the Irrationally Positive Brain (New York: Pantheon, 2011), xv; Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 255; Flyvbjerg, “Top Ten Behavioral Biases in Project Management.” 10. Iain A. McCormick, Frank

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of optimism bias that arises from individuals producing plans and estimates that are unrealistically close to best-case scenarios. The term was originally coined by Daniel Kahneman and Amos Tversky to describe the tendency for people to underestimate task completion times. Roger Buehler and his colleagues continued working following this definition. Later, the concept

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the scope they cover, with Cass Sunstein I suggested the term “planning fallacy writ large” for the broader concept, to avoid confusing the two. See Daniel Kahneman and Amos Tversky, “Intuitive Prediction: Biases and Corrective Procedures,” in Studies in the Management Sciences: Forecasting, vol. 12, eds. Spyros Makridakis and S. C. Wheelwright (Amsterdam: North

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. Psychologists have long tended to divide into two seemingly contradictory schools of thought on intuition. One school, known as “heuristics and biases” and led by Daniel Kahneman, relies mostly on laboratory experiments to show how the fast thinking of intuition can mislead. The other, known as “naturalistic decision making” (NDM), studies how

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joint paper that concluded that the two schools are actually in fundamental agreement. They also outlined the conditions required for skilled intuition to develop. See Daniel Kahneman and Gary Klein, “Conditions for Intuitive Expertise: A Failure to Disagree,” American Psychologist 64, no. 6 (September 2009): 515–26. For an overview of naturalistic

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. 6 (2010): 917–32; Bent Flyvbjerg, “Top Ten Behavioral Biases in Project Management: An Overview,” Project Management Journal 52, no. 6 (2021): 531–46. 7. Amos Tversky and Daniel Kahneman, “Judgment Under Uncertainty: Heuristics and Biases,” Science 185, no. 4157 (1974): 1124–31; see also Gretchen B. Chapman and Eric J. Johnson, “Anchoring, Activation

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4, no. 2 (2012): 131–45; Wilson et al., “A New Look at Anchoring Effects”; Epley and Gilovich, “The Anchoring-and-Adjustment Heuristic.” 8. Daniel Kahneman and Amos Tversky, “Intuitive Prediction: Biases and Corrective Procedures,” Studies in Management Sciences 12 (1979): 318. 9. Flyvbjerg, “Top Ten Behavioral Biases in Project Management”; Bent Flyvbjerg, Alexander

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Accuracy by Integrating Earned Value Management with Exponential Smoothing and Reference-Class Forecasting,” International Journal of Project Management 35, no. 1 (2017): 28–43. 16. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 251. 17. If you think your planned project will be affected by more and

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–77. 12. Hirschman, Development Projects Observed, 1, 3, 7, 13; Hirschman, “The Principle of the Hiding Hand.” 13. Flyvbjerg, “The Fallacy of Beneficial Ignorance.” 14. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 255. 15. Joseph Campbell, The Hero with a Thousand Faces (San Francisco: New World

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basic laws of rationality and logic; e.g., the availability heuristic and the anchoring heuristic; see Amos Tversky and Daniel Kahneman, “Availability: A Heuristic for Judging Frequency and Probability,” Cognitive Psychology 5, no. 2 (September 1973): 207–32; Daniel Kahneman, “Reference Points, Anchors, Norms, and Mixed Feelings,” Organizational Behavior and Human Decision Processes 51, no. 2

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(1992): 296–312. Daniel Kahneman and Amos Tversky are the leading exponents of this school. Both schools have demonstrated their relevance in impressive

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detail. Important disagreements exist between the two, to be sure; see Gerd Gigerenzer, “The Bias Bias in Behavioral Economics,” Review of Behavioral Economics 5, nos. 3–4 (December 2018): 303–36; Daniel Kahneman and Gary

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Social Inquiry Fails and How It Can Succeed Again. Cambridge, UK: Cambridge University Press. Flyvbjerg, Bent. 2003. “Delusions of Success: Comment on Dan Lovallo and Daniel Kahneman.” Harvard Business Review 81 (12): 121–22. Flyvbjerg, Bent. 2005. “Design by Deception: The Politics of Megaproject Approval.” Harvard Design Magazine 22 (Spring/Summer): 50

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Potential of New Infrastructure Development: An Empirical Study of Heathrow Airport’s T5 Project.” Research Policy 41 (2): 452–66. Gilovich, Thomas, Dale Griffin, and Daniel Kahneman, eds. 2002. Heuristics and Biases: The Psychology of Intuitive Judgment. Cambridge, UK: Cambridge University Press. Gino, Francesca, and Bradley Staats. 2015. “Why Organizations Don’t

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R. Sunstein. 2021. Noise: A Flaw in Human Judgment. London: William Collins. Kahneman, Daniel, Paul Slovic, and Amos Tversky, eds. 1982. Judgment Under Uncertainty: Heuristics and Biases. Cambridge, UK: Cambridge University Press. Kahneman, Daniel, and Amos Tversky. 1979. “Intuitive Prediction: Biases and Corrective Procedures.” In Studies in the Management Sciences: Forecasting, vol. 12, eds

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. Spyros Makridakis and S. C. Wheelwright. Amsterdam: North Holland, 313–27. Kahneman, Daniel, and Amos Tversky. 1979. “Prospect Theory: An Analysis of Decisions Under Risk.” Econometrica 47: 313–27. Kain, John F. 1990. “Deception in Dallas: Strategic Misrepresentation in Rail Transit

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–512. Lovallo, Dan, Matteo Cristofaro, and Bent Flyvbjerg. 2022. “Addressing Governance Errors and Lies in Project Forecasting.” Academy of Management Perspectives, forthcoming. Lovallo, Dan, and Daniel Kahneman. 2003. “Delusions of Success: How Optimism Undermines Executives’ Decisions.” Harvard Business Review 81 (7): 56–63. Lovering, Jessica R., Arthur Yip, and Ted Nordhaus. 2016

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Project as a Temporary Organization.” International Journal of Project Management 21 (7): 1–8. Tversky, Amos, and Daniel Kahneman. 1973. “Availability: A Heuristic for Judging Frequency and Probability.” Cognitive Psychology 5 (2): 207–32. Tversky, Amos, and Daniel Kahneman. 1974. “Judgment Under Uncertainty: Heuristics and Biases.” Science 185 (4157): 1124–31. Tversky, Amos, and

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. “The Framing of Decisions and the Psychology of Choice.” Science 211 (4481): 453–58. Tversky, Amos, and Daniel Kahneman. 1982. “Evidential Impact of Base Rates.” In Judgment Under Uncertainty: Heuristics and Biases, eds. Daniel Kahneman, Paul Slovic, and Amos Tversky. Cambridge, UK: Cambridge University Press, 153–62. Tyrnauer, Matt. 2010. “Architecture in the Age of Gehry

More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded)

by Michael J. Mauboussin  · 1 Jan 2006  · 348pp  · 83,490 words

hard to show the flaw in the treasurer’s logic, it’s easy to sympathize with his thinking. The Downside of Hardwiring In 1979, Daniel Kahneman and Amos Tversky outlined prospect theory, which identifies economic behaviors that are inconsistent with rational decision making.2 One of the most significant insights from the theory is

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wired to expect that the characteristics of chance show up not just in a total sequence but also in small parts of the sequence. Psychologists Amos Tversky and Daniel Kahneman call this “belief in the law of small numbers.” For example, if you show someone a short section of a long coin-toss series

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a gain or a loss will find the risky asset more attractive than another investor who expects to evaluate the outcome soon. —Richard H. Thaler, Amos Tversky, Daniel Kahneman, and Alan Schwartz, “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test” Loss aversion . . . can be considered a fact of life

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much in these crucial areas. In the last few decades, behavioral finance has considerably narrowed the gap between finance theory and psychology. For example, Daniel Kahneman and Amos Tversky developed a theory that concretely demonstrates how humans operate suboptimally versus what standard economic theory suggests. But even today, behavioral finance falls short of providing

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descriptions confirmed that the patients had no idea what was going on—either unconsciously or consciously.3 Two Follows One In his Nobel Prize lecture, Daniel Kahneman describes two systems of decision making.4 System 1, the experiential system, is “fast, automatic, effortless, associative, and difficult to control or modify.” System 2

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or not the individual is making decisions overtly. Intuition is a judgment that reflects an impression. Kahneman’s work (along with that of his collaborator, Amos Tversky) shows how impressions can lead to judgments that are suboptimal according to classical economic theory. So the evidence suggests that you can’t separate emotions

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must be constantly diligent to avoid pitfalls related to improper information weighting. EXHIBIT 17.1 Strength and Weight of Hypothesis Test Source: Dale Griffin and Amos Tversky, “The Weighing of Evidence and the Determinants of Confidence,” and author analysis. Misleading by Sample Understanding what’s going on—what value-added resellers are

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are some quick thoughts about where a multidisciplinary approach might help our investing knowledge:• Decision making and neuroscience. Throughout this book, I refer to Daniel Kahneman and Amos Tversky’s prospect theory, which describes how people systematically make decisions that deviate from the theoretical ideal. Prospect theory catalyzed the field of behavioral finance, dedicated

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See chapter 5. 7 Sarah Lichenstein, Baruch Fischhoff, and Lawrence D. Phillips, “Calibration of Probabilities,” in Judgment Under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky (Cambridge: Cambridge University Press, 1982), 306-34. 8 Peter Schwartz, Inevitable Surprises: Thinking Ahead in a Time of Turbulence (New York: Gotham Books, 2003

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Management (New York: Random House, 2000); Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007). 10 Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47 (1979): 263-91. 11 Nassim Nicholas Taleb, Fooled By Randomness: The Hidden Role of Chance

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you play the greater the odds that you lose. In investing, the longer you invest, the greater the odds that you generate positive returns. 2 Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47 (1979): 263-91. 3 Nassim Nicholas Taleb, Fooled By Randomness: The Hidden Role of

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, David Faust, and Paul E. Meehl, “Clinical Versus Actuarial Judgment,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 716-29. 6 Gawande, Complications, 44. 7 Katie Haffner, “In an Ancient Game, Computing’s Future,” The New York Times

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. 11 Ibid., 73-75. 7. The Hot Hand in Investing 1 Thomas Gilovich, Robert Valone, and Amos Tversky, “The Hot Hand in Basketball: On the Misperception of Random Sequences,” Cognitive Psychology 17 (1985): 295-314. 2 Amos Tversky and Daniel Kahneman, “Belief in the Law of Small Numbers,” Psychological Bulletin 76 (1971): 105-10. For an

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could occur over the course of some number of repetitions of the bet, then accepting the multiple bet is inconsistent with expected utility theory.” 2 Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47 (1979): 263-91. 3 Nicholas Barberis and Ming Huang, “Mental Accounting, Loss Aversion, and

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. Antoine Bechara, Hanna Damasio, Daniel Tranel, and Antonio R. Damasio, “Deciding Advantageously Before Knowing the Advantageous Strategy,” Science 275 (February 28, 1997): 1293-95. 4 Daniel Kahneman, “Maps of Bounded Rationality: A Perspective on Intuitive Judgment and Choice,” Nobel Prize Lecture, December 8, 2002, http://www.nobel.se/economics/laureates/2002/kahnemann

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Finucane, Ellen Peters, and Donald G. MacGregor, “The Affect Heuristic,” in Heuristics and Biases: The Psychology of Intuitive Judgment , ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 397-420. 6 Slovic, Finucane, Peters, and MacGregor, “The Affect Heuristic.” 7 Donald G. MacGregor, “Imagery and Financial Judgment,” The

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http://www.usdoj.gov/atr/cases/exhibits/20.pdf. 4 Dale Griffin and Amos Tversky, “The Weighing of Evidence and the Determinants of Confidence,” in Heuristics and Biases: The Psychology of Intuitive Judgment , ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 230-49. 5 Richard H. Thaler, The Winner

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, November 23, 2003, http://fisher.osu.edu/fin/dice/seminars/pollet.pdf. 10 See chapter 1. 11 http://www2.cio.com/techpoll/index.cfm. 12 Amos Tversky and Daniel Kahneman, “Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin

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, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 19-48. 13 Sanford J. Grossman and Joseph E. Stiglitz, “On the Impossibility of Informationally Efficient Markets,” American Economic Review

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Story of the 29th Division. London: Nelson & Sons, n.d. Gilovich, Thomas, Dale Griffin, and Daniel Kahneman, eds. Heuristics and Biases: The Psychology of Intuitive Judgment. Cambridge: Cambridge University Press, 2002. Gilovich, Thomas, Robert Valone, and Amos Tversky. “The Hot Hand in Basketball: On the Misperception of Random Sequences.” Cognitive Psychology 17 (1985): 295

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. Greenwald, John. “Doom Stalks the Dotcoms.” Time, April 17, 2000. Griffin, Dale, and Amos Tversky. “The Weighing of Evidence and the Determinants of Confidence.” In Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman, 230-49. Cambridge: Cambridge University Press, 2002. Grossman, Sanford J., and Joseph E

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. 8 December 2002. http://www.nobel.se/economics/laureates/2002/kahnemann-lecture.pdf. Kahneman, Daniel, and Amos Tversky. “Prospect Theory: An Analysis of Decision Under Risk.” Econometrica 47 (1979): 263-91. Kahneman, Daniel, Paul Slovic, and Amos Tversky, eds. Judgment Under Uncertainty: Heuristics and Biases. Cambridge: Cambridge University Press, 1982. Kauffman, Stuart. At Home

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Paper 4374-02, February 2002. Lichenstein, Sarah, Baruch Fischhoff, and Lawrence D. Phillips. “Calibration of Probabilities.” In Judgment Under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky, 306-34. Cambridge: Cambridge University Press, 1982. Liebovitch, Larry S., and Daniela Scheurle. “Two Lessons from Fractals and Chaos.” Complexity 5, no. 4

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Press, 2005. Thaler, Richard H. The Winner’s Curse: Paradoxes and Anomalies of Economic Life. Princeton, N.J.: Princeton University Press, 1994. Thaler, Richard H., Amos Tversky, Daniel Kahneman, and Alan Schwartz. “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test.” The Quarterly Journal of Economics (May 1997): 647-61

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/boringport/2000/boringport00051500.htm. Treynor, Jack L. “Market Efficiency and the Bean Jar Experiment.” Financial Analysts Journal (May-June 1987): 50-53. Tversky, Amos, and Daniel Kahneman. “Belief in the Law of Small Numbers.” Psychological Bulletin 76 (1971): 105-10. ——. “Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment.” In Heuristics

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and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman, 19-48. Cambridge: Cambridge University Press, 2002. USA Networks. SEC Filing, October 24, 2001. Utterback, James M. Mastering the Dynamics of Innovation. Boston: Harvard Business

The Drunkard's Walk: How Randomness Rules Our Lives

by Leonard Mlodinow  · 12 May 2008  · 266pp  · 86,324 words

not quite what they seem but rather something very different. IN 2002 THE NOBEL COMMITTEE awarded the Nobel Prize in Economics to a scientist named Daniel Kahneman. Economists do all sorts of things these days—they explain why teachers are paid so little, why football teams are worth so much, and why

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generated by economists, the 2002 Nobel Prize was notable because Kahneman is not an economist. He is a psychologist, and for decades, with the late Amos Tversky, Kahneman studied and clarified the kinds of misperceptions of randomness that fuel many of the common fallacies I will talk about in this book. The

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, was this misunderstanding of uncertainty? And what are its implications for human decision making? A few years passed, and Kahneman invited a fellow junior professor, Amos Tversky, to give a guest lecture at one of his seminars. Later, at lunch, Kahneman mentioned his developing ideas to Tversky. Over the next thirty years

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the classic explorations of people’s intuition about those laws was an experiment conducted by the pair who did so much to elucidate our misconceptions, Daniel Kahneman and Amos Tversky.1 Feel free to take part—and learn something about your own probabilistic intuition. Imagine a woman named Linda, thirty-one years old, single

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/-prob/prob/NEW/bestofchance.pdf. Chapter 2: The Laws of Truths and Half-Truths 1. Daniel Kahneman, Paul Slovic, and Amos Tversky, eds., Judgment under Uncertainty: Heuristics and Biases (Cambridge: Cambridge University Press, 1982), pp. 90–98. 2. Amos Tversky and Daniel Kahneman, “Extensional versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment,” Psychological Review 90, no. 4

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. Plato, The Dialogues of Plato, trans. Benjamin Jowett (Boston: Colonial Press, 1899), p. 116. 5. Plato, Theaetetus (Whitefish, Mont.: Kessinger, 2004), p. 25. 6. Amos Tversky and Daniel Kahneman, “Availability: A Heuristic for Judging Frequency and Probability,” Cognitive Psychology 5 (1973): 207–32. 7. Reid Hastie and Robyn M. Dawes, Rational Choice in an

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of what Bernoulli actually proved, see Stigler, The History of Statistics, pp. 63–78, and Ian Hacking, The Emergence of Probability, pp. 155–65. 18. Amos Tversky and Daniel Kahneman, “Belief in the Law of Small Numbers,” Psychological Bulletin 76, no. 2 (1971): 105–10. 19. Jakob Bernoulli, quoted in L. E. Maistrov, Probability

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Did It Again,” CNNMoney, January 11, 2004, http://money.cnn.com/2004/01/07/funds/ultimateguide_billmiller_0204. 24. Thomas R. Gilovich, Robert Vallone, and Amos Tversky, “The Hot Hand in Basketball: On the Misperception of Random Sequences,” Cognitive Psychology 17, no. 3 (July 1985): 295–314. 25. Purcell’s research is

Superforecasting: The Art and Science of Prediction

by Philip Tetlock and Dan Gardner  · 14 Sep 2015  · 317pp  · 100,414 words

the grass isn’t likely to live long enough to bequeath his accuracy-maximizing genes to the next generation. Snap judgments are sometimes essential. As Daniel Kahneman puts it, “System 1 is designed to jump to conclusions from little evidence.”13 So what about that shadow in the long grass? Should you

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see the shadow. Snap! You are frightened—and running. That’s the “availability heuristic,” one of many System 1 operations—or heuristics—discovered by Daniel Kahneman, his collaborator Amos Tversky, and other researchers in the fast-growing science of judgment and choice. A defining feature of intuitive judgment is its insensitivity to the quality

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settled. And the fact that “it all fits” gives us confidence that we know the truth. “It is wise to take admissions of uncertainty seriously,” Daniel Kahneman noted, “but declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story

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take one path or the other, but it has the advantage of being true, as the pioneering researchers behind both perspectives came to understand. While Daniel Kahneman and Amos Tversky were documenting System 1’s failings, another psychologist, Gary Klein, was examining decision making among professionals like the commanders of firefighting teams, and discovering

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Nobel laureates—the physicist Charles Townes, the economist Kenneth Arrow, and the unclassifiable Herbert Simon—and an array of other luminaries, including the mathematical psychologist Amos Tversky. I was by far the least impressive member of the panel, a thirty-year-old political psychologist just promoted to associate professor at the University

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especially the best and the brightest. Judging Judgments This got me thinking about expert forecasts. At lunch one day in 1988, my then–Berkeley colleague Daniel Kahneman tossed out a testable idea that proved prescient. He speculated that intelligence and knowledge would improve forecasting but the benefits would taper off fast. People

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does not require a Harvard PhD and the ability to speak five languages. I find that conclusion satisfying because it squares nicely with the hunch Daniel Kahneman shared with me all those years ago, when I started this research—that high-powered subject-matter experts would not be much better forecasters than

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is find out what percentage of American households own a pet. Statisticians call that the base rate—how common something is within a broader class. Daniel Kahneman has a much more evocative visual term for it. He calls it the “outside view”—in contrast to the “inside view,” which is the specifics

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means a bad anchor can easily produce a bad estimate. And it’s astonishingly easy to settle on a bad anchor. In classic experiments, Daniel Kahneman and Amos Tversky showed you could influence people’s judgment merely by exposing them to a number—any number, even one that is obviously meaningless, like one randomly

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have just two settings. It had a third: maybe. So that’s where he settled. Bowden’s account reminded me of an offhand remark that Amos Tversky made some thirty years ago, when we served on that National Research Council committee charged with preventing nuclear war. In dealing with probabilities, he said

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grasp that the outcome may or may not happen, Rubin said. “If you say something is 60/40, people kind of get the idea.”13 Amos Tversky died, far too young, in 1996. But that would have made him smile. Probability for the Information Age Scientists come at probability in a radically

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Super? For as long as I have been running forecasting tournaments—from Ronald Reagan and Red Army parades to today—I have been talking with Daniel Kahneman about my work. For that, I have been supremely fortunate. Kahneman is the accidental Nobelist, the cognitive psychologist who had no training in economics but

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to do with the Syrian civil war or any of the other geopolitical problems posed in the IARPA tournament? If you are as creative as Daniel Kahneman, the answer is “a lot.” Flash back to early 2012. How likely is the Assad regime to fall? Arguments against a fall include (1) the

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from peace to nuclear annihilation, which could have pushed the death toll for World War III into the hundreds of millions. Fat tails indeed!15 Daniel Kahneman makes the point with a characteristically elegant thought experiment. He invites us to consider three leaders whose impact on the twentieth century was massive—Hitler

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pressing issues, but nobody seems to have learned anything beyond how to defend their original position. We can do better. Remember the “adversarial collaboration” between Daniel Kahneman and Gary Klein? These two psychologists won acclaim by developing apparently contradictory schools of thought, making each man a threat to the legacy of the

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-world forecasting skills, a great discovery. And there is my gratitude toward the many friends and colleagues who commented on drafts of this book, including Daniel Kahneman, Terry Murray, Welton Chang, Jason Matheny, Angela Duckworth, Aaron Brown, Michael Mauboussin, Katrina Fincher, Eva Chen, Michael Horowitz, Don Moore, John Katz, John Brockman, Greg

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(New York: Basic Books, 2005), p. 28. 11. Ibid., p. 27. 12. Cochrane with Blythe, One Man’s Medicine, pp. 46, 157, 211, 190. 13. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), p. 209. 14. If you know cognitive psychology, you know that the heuristics-and

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, “Musical Chairs: Pocketbook Voting and the Limits of Democratic Accountability,” paper presented at the 2004 annual meeting of the American Political Science Association, Chicago. 19. Daniel Kahneman and Gary Klein, “Conditions for Intuitive Expertise: A Failure to Disagree,” American Psychologist 64, no. 6 (September 2009): 515–26. 20. W. G. Chase and

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. Bill Flack, in discussion with the author, August 5, 2014. 9. Peggy Noonan, “The Presidential Wheel Turns,” Wall Street Journal, April 26, 2013. 10. Amos Tversky and Daniel Kahneman, “Judgment Under Uncertainty: Heuristics and Biases,” Science 185 (4157): 1124–31. 11. Bruce Bueno de Mesquita in The Predictioneer’s Game (New York: Random House

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he had yet to hear anything that would cause him to move his probability dial far enough to choose; see Eldar Shafir, Itamar Simonson, and Amos Tversky, “Reason-based Choice,” Cognition 49 (1993): 11–36. This is where the application of the earlier described “extremizing” method of aggregating probability judgments could make

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, and the Search for Bin Laden,” Intelligence and National Security 30, no. 1 (January 2015): 77–99. 8. For a summary of the research, see Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011). 9. This aversion to uncertainty underlies the Ellsberg paradox, named after Daniel Ellsberg, who

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the questioner unpacks, the more obvious it becomes that the casual user of 0.5 is assigning incoherent probabilities that far exceed 1.0. See Amos Tversky and Derek Koehler, “Support Theory: A Nonextensional Representation of Subjective Probability,” Psychological Review 101, no. 4 (1994): 547–67. Also, even when people feel they

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and the Human Security Report Project: Human Security Report 2013: The Decline in Global Violence (Vancouver, BC: Human Security Press, Simon Fraser University, 2013). 3. Daniel Kahneman and Shane Frederick, “Representativeness Revisited: Attribute Substitution in Intuitive Judgment,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and

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Daniel Kahneman (Cambridge: Cambridge University Press, 2002), pp. 49–81. 4. Nassim Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2010),

Priceless: The Myth of Fair Value (And How to Take Advantage of It)

by William Poundstone  · 1 Jan 2010  · 519pp  · 104,396 words

view, internal prices are “constructed” as needed from hints in the environment. One demonstration of how that works is the “United Nations” experiment of Amos Tversky and Daniel Kahneman. Tversky and Kahneman are a legendary team of Israeli American psychologists. Kahneman, now in his mid-seventies, is a very active senior scholar at Princeton

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are packed and unobtainable, while the one-dollar seats are empty. A lot of music lovers miss out—because the price is too low. When Amos Tversky received a MacArthur grant in 1984, he joked that his work had established what was long known to “advertisers and used-car salesmen.” This was

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says it all: “The More You Ask For, the More You Get.” Anchoring research has convinced some that jurors should not directly set damage awards. Daniel Kahneman believes that jurors are trying to express their outrage at the defendant’s actions in the incoherent language of dollars. It’s as if jurors

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first to demonstrate clearly just how clueless people are about prices and decisions based on them. For one productive year, ORI was also home to Amos Tversky and Daniel Kahneman, perhaps the most influential psychologists of their age. Before getting to this illustrious group, it’s necessary to say something about their predecessors, and

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the certainty effect per se. It’s the way that smart people are influenced by mere words, by the way the choices are framed. As Amos Tversky later wrote, “We choose between descriptions of options, rather than between the options themselves.” For the most part, economists were not ready to accept that

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that happy outcome. Here, too, players tried to make allowances for dollar amounts and other complicating details. Once again, the adjustments tended to be inadequate. Amos Tversky and Paul Slovic later generalized this idea into a “compatibility principle.” This rule says that decision makers give the most attention to information that is

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archaeology. To name a price is to build a valuation (rather than to excavate deep into the psyche and uncover one). A 1990 paper by Amos Tversky and Richard Thaler took its imagery from America’s great wellspring of metaphors, baseball. It involves the old joke about the three umpires: “I call

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reprints. They were crankish lunacy. Among economists, only the freaks and weirdos could “appreciate” his work. Thirteen Kahneman and Tversky During the 1956 Sinai war, Amos Tversky was a platoon commander in an Israeli paratroop regiment. Chief of Staff Moshe Dayan came to observe Tversky’s platoon in exercises one day. A

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Lichtenstein. “You were happy being in his presence,” said mathematician Persi Diaconis, who knew him at Stanford. “There was a light shining out of him.” Amos Tversky (1937–1996) was born in the biblical city of Haifa, then part of British Palestine. His mother, Genia, a social worker, would later serve fifteen

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. in 1965, Amos and New York–born Barbara moved to Israel. He spent a dozen years teaching psychology at Hebrew University. There, in 1968, colleague Daniel Kahneman asked him to give a talk for a graduate seminar. This turned out to be a “life-changing event,” in Kahneman’s words. Kahneman’s

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, “Everything we wrote was obvious. In some sense, nothing surprised Ward. Nothing of what we were saying surprised him.” Twenty-two Deal or No Deal Amos Tversky told almost no one of the metastatic melanoma that was killing him. Deathly ill, he went into the office and worked up to three weeks

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distasteful part of their work be accomplished quickly. Once he was able to leave the hospital, Ariely studied psychology at Tel Aviv University. (He met Amos Tversky, who gave a lecture there.) Ariely acquired a grounding in psychophysics, reading the work of S. S. Stevens and others. He did experiments on pain

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will never order it, the exposure subtly raises diners’ estimates of how much they can eat and what they’re willing to pay. One of Daniel Kahneman’s anchoring experiments is worth mentioning in this connection. He and Karen Jacowitz tried asking: (a) Does the average American eat more or less than

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get happy by buying something else. One of the key insights of behavioral pricing is that items that don’t sell can change what does. Amos Tversky liked to tell this story. The Williams-Sonoma chain, known for high quality and prices to match, once offered a fancy breadmaker for $279. They

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save a few dollars on beef. The point is, things no one believes still affect behavior. Thirty-eight Groundhog Day “Anchoring is not a curiosity,” Daniel Kahneman said. It “works quite well in negotiations, where getting in your number first gives an advantage.” For bargainers, this simple rule may be the most

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economist currently experiencing a revival of interest. No less a figure than Richard Thaler has hailed Fisher as a pioneer of behavioral economics. One of Amos Tversky’s last papers treated Fisher’s concept of a “money illusion,” a cognitive trick that comes into play during times of inflation. Fisher was an

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and newspaper reports often manifest money illusion, even in familiar contexts and among people who, at some level, know better,” Eldar Shafir, Peter Diamond, and Amos Tversky wrote. Try thumbing through the Guinness Book of World Records. It’s full of money records—the highest-paid athlete, the record auction price, the

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-shirt that sparked Sara Solnick’s interest in gender and bargaining. As a young economics student she signed up for a summer institute sponsored by Daniel Kahneman and Richard Thaler. There she came across T-shirts asking “Does Homo Economicus Exist?” “They critiqued the existing models of economic man, but they still

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, jurors thought Joan’s case was worth? Try $22 million. “Joan” is not a real child, but she figured in an intriguing experiment conducted by Daniel Kahneman, David Schkade, and Cass Sunstein. They wanted to see whether they could induce jurors to award crazy, Liebeck v. McDonald’s amounts for injuries that

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Johnson is a boyishly enthusiastic Columbia Business School professor, old enough to have taken a Ph.D. under Herbert Simon and to have collaborated with Amos Tversky. One of Johnson’s grad students, Naomi Mandel, was reading about priming and wondered whether it would work with a Web page. “I said it

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in American culture and in cultures around the globe with strong market economies. “Priming effects may provide one of the mechanisms by which culture works,” Daniel Kahneman has suggested. “Some cultures provide the equivalent of constant reminders of money. Other cultures remind you that there are eyes looking at you. Some make

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different version of this heroic act. This account is based mainly on Daniel Kahneman’s account in Stanford University News Service 1996. 81 “Amos was something special”: Sarah Lichtenstein interview, July 30, 2008. 81 “You were happy”: Stanford University News Service, “Amos Tversky, leading decision researcher, dies at 59” (June 5, 1996). 81 Tversky

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William H. Dare (2004). “The Effects of Charm Listing Prices on House Transaction Prices.” Real Estate Economics 32, 695–713. American Psychologist (no byline) (1983). “Daniel Kahneman and Amos Tversky.” American Psychologist, Jan. 1983, 2–9. Anderson, Eric T., and Duncan I. Simester (2003). “Effects of $9 Price Endings on Retail Sales: Evidence from

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F. Loewenstein (1995). “Perceptions of Fairness in Interpersonal and Individual Choice Situations.” Current Directions in Psychological Science 4, 39–43. Bell, David, Howard Raiffa, and Amos Tversky (1988). “Descriptive, Normative, and Prescriptive Interactions in Decision Making.” In Bell, Raiffa, and Tversky (eds.), Decision Making: Descriptive, Normative, and Prescriptive Interactions. Cambridge: Cambridge University

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54, 395–403. Hutsko, Joe (2008). “Consumers Want, and Are Skeptical About, Eco-Electronics.” The New York Times, Dec. 10, 2008. Jacowitz, Karen E., and Daniel Kahneman (1995). “Measuring of Anchoring in Estimation Tasks.” Personality and Social Psychology Bulletin 21, 1161–66. Jensen, Keith, Josep Call, and Michael Tomasello (2007). “Chimpanzees Are

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and Uncertainty 16, 49–86. ———, and Eldar Shafir. “Amos Tversky (1937–1996).” American Psychologist 53, 793–94. ———, Paul Slovic, and Amos Tversky (1982). Judgment Under Uncertainty: Heuristics and Biases. Cambridge: Cambridge University Press. ———, and Amos Tversky (1973). “On the Psychology of Prediction.” Psychological Review 80, 237–51. ———, and Amos Tversky (1979). “Prospect Theory: An Analysis of Decision Under

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Risk.” Econometrica 47, 263–92. ———, and Amos Tversky (1984). “Choices, Values and Frames.” American

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Psychologist 39, 341–50. ———, and Amos Tversky (1996). “On the Reality of Cognitive Illusions.” Psychological Review 103, 582–91. Kay, Aaron

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. Knetsch, Jack (1989). “The Endowment Effect and Evidence of Nonreversible Indifference Curves.” The American Economic Review 79, 1277–84. Knetsch, Jack L., Richard Thaler, and Daniel Kahneman (1986). “Experimental Tests of the Endowment Effect and the Coase Theorem.” Simon Fraser University Working Paper, 1988. Kouri, Elena, Scott Lukas, Harrison Pope, and P

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Generosity.” American Chronicle, July 10, 2007. Lacayo, Richard (2008). “Damien Hirst: Bad Boy Makes Good.” Time, Sep. 4, 2008. Laibson, David, and Richard Zeckhauser (1998). “Amos Tversky and the Ascent of Behavioral Economics.” Journal of Risk and Uncertainty 16, 7–47. Lambert, Craig (2006). “The Marketplace of Perceptions.” Harvard Magazine, March–April

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. (2009). “Finger Length May Predict Financial Success.” Associated Press, Jan. 12, 2009. Shafir, Eldar, Peter Diamond, and Amos Tversky (1997). “The Money Illusion.” The Quarterly Journal of Economics 112, 341–74. Shafir, Eldar, Itamar Simonson, and Amos Tversky (1993). “Reason-Based Choice.” Cognition 49, 11–36. Sharkey, Joe (2009). “Seats Are Cheap Now, but

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Management 2, 203–18. ———, Frank F. Bilstein, and Frank Luby (2006). Manage for Profit, Not Market Share. Boston: Harvard Business School Press. Simonson, Itamar, and Amos Tversky (1992). “Choice in Context: Tradeoff Contrast and Extremeness Aversion.” Journal of Marketing Research 29, 281–95. Slovic, Paul, and Sarah Lichtenstein (1968). “The Relative Importance

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of Probabilities and in Risk-Taking.” Journal of Experimental Psychology Monograph Supplement 78 (3, pt. 2), 1–18. ———, and Amos Tversky (1974). “Who Accepts Savage’s Axiom?” Behavioral Science 19, 368–73. ———, Sarah Lichtenstein, and Ward Edwards (1965). “Boredom-Induced Changes in Preferences Among Bets.” The

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with Services.” Simon-Kucher & Partners white paper. Available at www2.simon-kucher.com/index.php/us/publications/white-papers.html. Stanford University News Service (1996). “Amos Tversky, Leading Decision Researcher, Dies at 59.” June 5, 1996. Steele, C. M., and R. A. Josephs (1990). “Alcohol Myopia: Its Prized and Dangerous Effects.” American

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Macmillan. Tuohy, John William (2001). “The Greenbaum Murder.” American-Mafia.com, Oct. 2001. Available at www.americanmafia.com/Feature_Articles_264.html. Tversky, Amos, and Daniel Kahneman (1971). “Belief in the Law of Small Numbers.” Psychological Bulletin 76, 105–10. ———(1974). “Judgment Under Uncertainty: Heuristics and Biases.” Science 185, 453–58. ———(1981

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