Thinking through categories

Abstract

I present a model in which people use categories to think about the world around them. Faced with data they first pick a category which best matches it. To make predictions they ask how representative an outcome would be of the chosen category. This simple model unites many of the experimentally documented biases the law of small num bers, the hot hand, representativeness and the conjunction fallacy. Moreover, the model provides enough structure that it provides readily testable out of sample predictions regarding these biases.