Kahneman & Tversky, On the psychology of prediction. Psychological
review, 1973, 80, 237-257.
This paper explores the rules or intuitive predictions (for both category
prediction and numerical prediction). Instead of using statistics, people
rely on a limited number of heuristics to sometimes are reasonable and sometimes
give serious errors. In fact, people seem to make predictions based on
the degree which the prediction represents the given evidence.
This may work (sometimes representation conincides with likelihood), but
often it has no correlation with likelihood or reliability of evidence.
Initial studies show the people predict by similarity, not be statistical
likelihood. People relied upon descriptions and ignored base rates. Even
when the subjects were told that the qualitative description had either
low or high predictability, it had little effect on improving the statistical
considerations. People still predicted likelihood based on similarity.
However, when no description is available, people will use the base rate.
When specific evidence is given, people will ignore prior probabilities.
In numerical predictions people again base their prediction assuming the
descriptions are highly accurate, even when told not to assume that. People
fail to "regress" or move to predicting the mean even when the
input data is stated to be highly unreliable.
Confidence also seems to be related to consistency of data.
In interviews, people will express great confidence in their evaluations,
even when they know that interviews are notoriously fallible.
One problem with high reinforcement by praise is that we tend to praise
when performance is high and punish when performance is low. By regression
we see that after high performance (and praise) the most likely effect is
to get worse, while the most likely effect after poor performance (punishment)
is to improve.