A method for modeling bias in a person's estimates of likelihoods of events

It is of practical importance in decision situations involving risk to train individuals to transform uncertainties into subjective probability estimates that are both accurate and unbiased. We have found that in decision situations involving risk, people often introduce subjective bias in their estimation of the likelihoods of events depending on whether the possible outcomes are perceived as being good or bad. Until now, however, the successful measurement of individual differences in the magnitude of such biases has not been attempted. In this paper we illustrate a modification of a procedure originally outlined by Davidson, Suppes, and Siegel (3) to allow for a quantitatively-based methodology for simultaneously estimating an individual's subjective utility and subjective probability functions. The procedure is now an interactive computer-based algorithm, DSS, that allows for the measurement of biases in probability estimation by obtaining independent measures of two subjective probability functions (S+ and S-) for winning (i.e., good outcomes) and for losing (i.e., bad outcomes) respectively for each individual, and for different experimental conditions within individuals. The algorithm and some recent empirical data are described.