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In a seminal work, Tversky and Kahneman showed that in some contexts people tend to believe that a conjunction of events (e.g., Linda is a bank teller and is active in the feminist movement) is more likely to occur than one of the conjuncts (e.g., Linda is a bank teller). This belief violates the conjunction rule in probability theory. Tversky and Kahneman called this phenomenon the "conjunction fallacy". Since the discovery of the phenomenon in 1983, researchers in psychology and philosophy have engaged in important controversies around the conjunction fallacy. The goal of this paper is to explore the most important of these controversies, namely, the controversy about the nature of the conjunction fallacy. Is the conjunction fallacy mainly due to a misunderstanding of the problem by participants (misunderstanding hypothesis) or is it mainly due to a genuine reasoning bias (reasoning bias hypothesis)? A substantial portion of research on the topic has been directed to test the misunderstanding hypothesis. I review this literature and argue that a stronger case can be made against the misunderstanding hypothesis. Thus, I indirectly provide support for the reasoning bias hypothesis.

We report a sequential bribery game to disentangle the effect of descriptive social norms among public officials on bribe offers by firms. Participants who knew that they were interacting with a partner from a group with a majority of corrupt (as opposed to honest) partners offered twice as many bribes. This effect of norms occurred independently of strategic considerations and the possibility of being sanctioned. Indeed, the effect of sanctions was not significant. These findings highlight a causal connection from perceptions of bribery to actual behavior. (JEL C91, D73, K42)

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