Intuitive Biases in Choice vs. Estimation: Implications for the Wisdom of Crowds

Simmons, Joseph P., Leif D. Nelson, Jeff Galak, and Shane Frederick (2011), “Intuitive Biases in Choice vs. Estimation: Implications for the Wisdom of Crowds,” Journal of Consumer Research, 38 (June), 1-15.

16 Pages Posted: 17 Feb 2010 Last revised: 24 Aug 2012

Joseph P. Simmons

University of Pennsylvania - The Wharton School

Leif D. Nelson

University of California, Berkeley - Haas School of Business

Jeff Galak

Carnegie Mellon University

Shane Frederick

Yale School of Management

Date Written: July 22, 2010

Abstract

Although researchers have documented instances of crowd wisdom, it is important to know whether some kinds of judgments may lead the crowd astray, whether crowds’ judgments improve with feedback over time, and whether crowds’ judgments can be improved by changing the way judgments are elicited. We investigated these questions in a sports gambling context (predictions against point spreads) believed to elicit crowd wisdom. In a season-long experiment, fans wagered over $20,000 on NFL football predictions. Contrary to the wisdom-of-crowds hypothesis, faulty intuitions led the crowd to predict “favorites” more than “underdogs” against point spreads that disadvantaged favorites, even when bettors knew that the spreads disadvantaged favorites. Moreover, the bias increased over time, a result consistent with attributions for success and failure that rewarded intuitive choosing. However, when the crowd predicted game outcomes by estimating point differentials rather than by predicting against point spreads, its predictions were unbiased and wiser.

Keywords: Judgment and Decision Making, Heuristics and Biases, Intuition, Preference Reversals, Learning

Suggested Citation

Simmons, Joseph P. and Nelson, Leif D. and Galak, Jeff and Frederick, Shane, Intuitive Biases in Choice vs. Estimation: Implications for the Wisdom of Crowds (July 22, 2010). Simmons, Joseph P., Leif D. Nelson, Jeff Galak, and Shane Frederick (2011), “Intuitive Biases in Choice vs. Estimation: Implications for the Wisdom of Crowds,” Journal of Consumer Research, 38 (June), 1-15. . Available at SSRN: https://ssrn.com/abstract=1553935 or http://dx.doi.org/10.2139/ssrn.1553935

Joseph P. Simmons (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

Leif D. Nelson

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Jeff Galak

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States
412-268-5810 (Phone)

HOME PAGE: http://www.jeffgalak.com

Shane William Frederick

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
2034368122 (Phone)

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