Which of the following actions may be explained by the law of small numbers?
A) People buy lottery tickets.
B) People buy air travel insurance.
C) People purchase extended or long-term warranties or maintenance contracts for new automobiles and appliances.
D) all of the above

Question

Quizplus · Accepted Answer

All of the given actions can be explained by the law of small numbers, which refers to the tendency for people to make generalizations based on small sample sizes or limited information. For example, people may buy lottery tickets because they believe that their chances of winning are greater than they really are, simply because they have heard of some winners in the past. Similarly, people may purchase insurance or warranties based on a few anecdotes of unfortunate incidents happening to others, without considering the actual probability of those events occurring to them.

Which of the Following Actions May Be Explained by the Law