Familiarity bias and belief reversal in relative likelihood judgment

People are often called on to make an assessment of the relative likelihood of events (e.g., which of two investments is more likely to outperform the market?) and their complements (which of the two investments is more likel y to perform no better than the market?), Probability theory assumes that b elief orderings over events and their complements should mirror each other (i.e., P(A) greater than or equal to P(B) iff P (not-A) less than or equal to P(not-B)), This principle is violated in several surveys in which we ask ed people to assess the relative likelihood of familiar versus unfamiliar e vents. In particular, respondents are biased to view more familiar events ( and their complements) as more likely than less familiar events (and their complements). Similarly, we observe that subjects are biased to view less f amiliar events (and their complements) as less likely than more familiar ev ents (and their complements), Further studies demonstrate that the familiar ity bias is less pronounced among subjects who are asked to judge the proba bility of each event rather than which event is more likely, Moreover, a gr eater proportion of subjects rate the more familiar event as more likely th an assign a higher probability to that event. These patterns can be constru ed as belief reversals, analogous to the preference reversal phenomenon in decision making. The data are consistent with a contingent weighting model in which the process of judging relative likelihood biases attention toward evidence supporting the target hypothesis (and away from evidence supporti ng its complement). Because it is easier to recruit evidence supporting fam iliar events than unfamiliar events, this skewed attention causes both fami liar events and their complements to be judged more likely, on average, tha n unfamiliar events and their complements. (C) 2000 Academic Press.