A Model of Nonbelief in the Law of Large Numbers

A-Tier
Journal: Journal of the European Economic Association
Year: 2016
Volume: 14
Issue: 2
Pages: 515-544

Authors (3)

Daniel J. Benjamin (University of Southern Califor...) Matthew Rabin (not in RePEc) Collin Raymond (not in RePEc)

Score contribution per author:

1.341 = (α=2.01 / 3 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

People believe that, even in very large samples, proportions of binary signals might depart significantly from the population mean. We model this “nonbelief in the Law of Large Numbers” by assuming that a person believes that proportions in any given sample might be determined by a rate different than the true rate. In prediction, a nonbeliever expects the distribution of signals will have fat tails. In inference, a nonbeliever remains uncertain and influenced by priors even after observing an arbitrarily large sample. We explore implications for beliefs and behavior in a variety of economic settings.

Technical Details

RePEc Handle
repec:oup:jeurec:v:14:y:2016:i:2:p:515-544.
Journal Field
General
Author Count
3
Added to Database
2026-01-24