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The representativeness heuristic 257
high sales, assuming there has been no fundamental change in the
market conditions or your marketing strategy, will almost certainly be
followed by a month of poorer sales, while the reverse will also be true.
As Plous 7 points out, athletes and teams who appear on the cover of
the US magazine Sports Illustrated usually experience a deterioration in
performance after the magazine has been published. A cover appearance
usually follows an exceptional performance, so closer to average
performance is likely in the subsequent period. In all of these cases
the unusual event is probably a result of a particularly favorable (or
unfavorable) combination of chance factors which is unlikely to recur in
the following period.
Unfortunately, regression to the mean is widely ignored or misunderstood.
According to Tversky and Kahneman, people assume that, when
an event follows an extreme event, it will be maximally representative of
the extreme event. In other words, people expect extremes to be followed
by similar extremes. They expect extremely tall fathers to have sons as
tall as them and extremely high sales in one month to be followed by the
same level of sales in the following month.
Failure to recognize regression to the mean can have important
consequences. Tversky and Kahneman describe the case of the flight
instructors who praised trainee pilots after exceptionally smooth landings
and admonished them after rough landings. As a result of regression
to the mean, exceptionally smooth landings tended to be followed by
poorer landings on the next flight, while rough landings were followed
by better landings. This led to the mistaken belief, by the flight
instructors, that criticism was more effective than praise.
Test your judgment: answer to question 8
Q8. Because of regression to the mean, lower sales is most likely.
5. The conjunction fallacy
Consider the following question which is taken from a study by Tversky
and Kahneman. 8
Linda is 31 years old, single, outspoken and very bright. She majored in
philosophy. As a student, she was deeply concerned with issues of discrimination
and social justice, and also participated in anti-nuclear demonstrations.
Which is most likely: