Ambiguity , the Certainty Illusion , and Gigerenzer ' s Natural Frequency Approach to Reasoning with Inverse Probabilities

People have difficulty reasoning with information to do with uncertain situations, including when making economic decisions. This is especially true when decisions require the calculation of conditional probabilities. Putting the data in terms of natural frequencies as promoted by Gigerenzer (2002) makes it easier for people to reason in situations of uncertainty. Unfortunately, it invokes the normally false assumption that the frequency information is precise. The use of simple graphical techniques can help to resolve this problem, providing a tool that can be used for making decisions in uncertain situations when the probabilistic information is imprecise and thus ambiguity exists.