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The ratio bias phenomenon: fact or artifact?

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Abstract

The ratio bias—according to which individuals prefer to bet on probabilities expressed as a ratio of large numbers to normatively equivalent or superior probabilities expressed as a ratio of small numbers—has recently gained momentum, with researchers especially in health economics emphasizing the policy importance of the phenomenon. Although the bias has been replicated several times, some doubts remain about its economic significance. Our two experiments show that the bias disappears once order effects are excluded, and once salient and dominant incentives are provided. This holds true for both choice and valuation tasks. Also, adding context to the decision problem does not alter this finding. No ratio bias could be found in between-subject tests either, which leads us to the conclusion that the policy relevance of the phenomenon is doubtful at best.

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Authors and Affiliations

  1. CREPP, University of Liège, Boulevard du Rectorat, 7 Bâtiment 31, boîte 39, 4000, Liège, Belgium

    Mathieu Lefebvre

  2. University Lyon 2, 69007, Lyon, France

    Ferdinand M. Vieider & Marie Claire Villeval

  3. CNRS, GATE, 93, Chemin de Mouilles, 69130, Ecully, France

    Ferdinand M. Vieider & Marie Claire Villeval

  4. Climate Policy Initiative, DIW Berlin, Mohrenstraße 58, 10108, Berlin, Germany

    Ferdinand M. Vieider

  5. IZA, Bonn, Germany

    Marie Claire Villeval

  6. CCP, Aarhus, Denmark

    Marie Claire Villeval

Authors
  1. Mathieu Lefebvre
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  2. Ferdinand M. Vieider
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  3. Marie Claire Villeval
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Correspondence to Ferdinand M. Vieider.

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Lefebvre, M., Vieider, F.M. & Villeval, M.C. The ratio bias phenomenon: fact or artifact?. Theory Decis 71, 615–641 (2011). https://doi.org/10.1007/s11238-010-9212-9

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