Think you’re rational? Better think twice!28 December, 2015 at 16:23 | Posted in Economics | 10 Comments
My friend Ben says that on the first day he got the following sequence of Heads and Tails when tossing a coin:
H H H H H H H H H H
And on the second day he says that he got the following sequence:
H T T H H T T H T H
Which day-report makes you suspicious?
Most people I ask this question says the first day-report looks suspicious.
But actually both days are equally probable! Every time you toss a (fair) coin there is the same probability (50 %) of getting H or T. Both days Ben makes equally many tosses and every sequence is equally probable!
And in mainstream economics one of the basic assumptions is typically — still — that people make rational choices …