This paper describes a study which presented people with trended and untrended time series and asked them to estimate the probability that the next point would be below each of seven different reference values. The true probabilities that the point would be below these values were 0.01, 0.10, 0.25, 0.50, 0.75, 0.90 and 0.99. People overestimated probabilities of less than 0.50 and underestimated those of more than 0.50. Consequently, their subjective probability distributions were flatter than they should have been: people appeared to be underconfident in their estimates of where the next point would lie. This bias was greater for the trended series. It was also greater in a second experiment in which people estimated the probability that the next item would be above the reference values. The paper discusses reasons for these effects and considers their implications for decision making.
