Economics, 3rd Edition

People Give Too Much Weight to a Small Number of Vivid Observations

Imagine that you are thinking about buying a new smart phone by company X. To learn about its reliability, 

you read Consumer Reports, which has surveyed 1,000 owners of the particular smart phone that you are 

looking at. Then you run into a friend who owns such a phone and she tells you that she is really unhappy 

with the phone. How do you treat your friend’s observation? If you think rationally, you will realize that 

she has only increased your sample size from 1,000 to 1,001, which does not provide much new inform-

ation. In addition, a process called the reticular activation system (RAS) works to bring your attention to 

instances of this smart phone – you will suddenly start to notice more of them. The RAS is an automatic 

mechanism in the brain that brings relevant information to our attention. Both these effects – your friend’s 

story is so vivid and you have noticed more of these smart phones around – mean that you may be temp-

ted to attach a disproportionate weight to them in decision making.