3. Illusory correlation
Suppose that you are a manager of a factory and you are considering whether you are more
likely to obtain defective goods from a domestic or foreign supplier. Before thinking about your
answer you may already have some preconceptions, for example that foreign goods tend to be
less reliable. In this case, you are likely to find it easy to recall or imagine instances of the cooccurrence of the events foreign supplier and goods defective.
In decision analysis models, illusory correlation is of concern when conditional probabilities (e.g.
p(goods defective|foreign supplier)) have to be estimated.