The Viability of Heuristics in Expert Judgement

37 Pages Posted: 15 Oct 1998

See all articles by Paul E. Fischer

Paul E. Fischer

University of Pennsylvania - Accounting Department

Robert E. Verrecchia

University of Pennsylvania - Accounting Department

Date Written: July 13, 1998

Abstract

A conventional assumption in economic models is that expert judgement requires Bayesian behavior. A justification for this assumption is that because Bayesian behavior results in superior decisions, it is dominant in a evolutionary sense. Bayesian experts who are sequentially rational, however, set standards that are "too low". Consequently, heuristic behaviors that result in more stringent sequentially rational standards may dominate Bayesian behavior. This suggests that deviations from Bayesian behavior observed in experimental auditing settings may be viable in an evolutionary sense in real economic settings.

JEL Classification: D49, D83

Suggested Citation

Fischer, Paul E. and Verrecchia, Robert E., The Viability of Heuristics in Expert Judgement (July 13, 1998). Available at SSRN: https://ssrn.com/abstract=124489 or http://dx.doi.org/10.2139/ssrn.124489

Paul E. Fischer (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Robert E. Verrecchia

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-6976 (Phone)
215-573-2054 (Fax)

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