The Law of Small Numbers

Abstract

The behavior economics, based on the discoveries to correct and complete the models of economics, has changed from a trend of thoughts to a part of the empirical field of economics after decades of development. Meanwhile, the Law of Small Numbers, a vital theorem in behavioral economics, serves as a vehicle for economists to complement the rational decision-making model and plays an essential function. This research paper is written to gain a better understanding of the Law of Small Numbers, in addition to introducing and analyzing its practical usage and applications, thus boosting the absorption and consolidation of knowledge. Due to unconsciousness, the Law of Small Numbers user cannot realize that their decisions are actually blind. In the meantime, people are prone to make up the relationship between two irrelevant facts, thus firmly believing their conclusions or predictions without the consciousness that their reasonings are incorrect.