Can anybody explain me the difference? As far as I understand:
Representativeness is where you overweight new information, and base your decisions on past experience
Conservatism is where you cling your old forecast, despite new information, so you underweight the new information.
Any takers?
i think that’s fair…
conservatism bias : overweigting the base rate/underweighting new info
representativeness biass:underweight base rate / overweight new info
for conservatism i would replace the word “forecasts” with “beliefs”. Forecasts is really more anchoring, I know its a nuance but it makes a difference.
For representativeness, I don’t know if i would say it’s overweighting new info, its more like assuming your past experiences based on heuristics will continue to hold to future applications. Like, a value manager that made money for you in the past causes you to select one 10 years later because you feel the old go was “representative” of all value managers.
There is alot of overlap on these topics and it can get tricky, but if i was a betting man I would say this will show up in a full vignette dedicated to it. New sections in my experience are always given excessive weight.
Thanks Mark, I also expect the they will kill us with this stuff. As you have pointed out there are a lot of grey areas between the biases, which makes it difficult to differentiate from one another.
Let’s hope for the best, as I am still not confident that I totally grasp the behavioral sessions.
So…
Conservatism bias: Clinging to your old beliefs, despite new information, so you underweight the new information. Representativeness bias: Assumption that your past experiences based on heuristics will continue to hold to future applications. Like, a value manager that made money for you in the past causes you to select one 10 years later because you feel the old go was “representative” of all value managers.
Will you not be overweigting the base rate/underweighting new info in both cases?
I agree with your assessment…
conservatism, sticking to old beliefs, overweighting the base, representativeness overweighting new information, underweighting the base…
and like Mark said, “forecasts” implies some set number, which would make it anchoring and adjustment.
subtleties…
@ Damil, I think that falls more under the “categories” aspect…you categorize value as winners…
Someone else may want to comment on that part for sure, and I agree with you Sabirin, the behavioral issues are a problem for me as well…to much grey.