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Are Judgment Errors Reflected in Market Prices and Allocations? Experimental Evidence Based on the Monty Hall Problem


  • Brian D. Kluger,

  • Steve B. Wyatt

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    • Both authors are at the University of Cincinnati. We are grateful to Lucy Ackert, Ann Gillette, Rick Green (the editor), Brian Hatch, Chuck Schnitzlein, Steve Slezak, David Stolin, seminar participants at McMaster University and Stockholm Institute for Financial Research, and an anonymous referee for helpful suggestions.


The question of whether individual judgment errors survive in market equilibrium is an issue that naturally lends itself to experimental analysis. Here, the Monty Hall problem is used to detect probability judgment errors both in a cohort of individuals and in a market setting. When all subjects in a cohort made probability judgment errors, market prices also reflected the error. However, competition among two bias-free subjects was sufficient to drive prices to error-free levels. Thus, heterogeneity in behavior can be an important factor in asset pricing, and further, it may take few bias-free traders to make asset prices bias-free.