What is termed as the tendency to estimate the probability of an event based on its similarities to a prototype?

The concept being described is indeed representativeness bias. This cognitive bias occurs when individuals judge the likelihood of an event based on how closely it resembles a certain prototype or stereotype that they have in mind. For example, if someone encounters a well-dressed individual who speaks eloquently, they might be inclined to categorize that person as a successful business professional, even without additional evidence to support that assumption.

This type of bias can lead to erroneous conclusions because it relies on the perceived similarities between the situation at hand and the mental images or prototypes we possess, rather than on actual statistical data or probabilities. It often results in neglecting the base rates or real statistical likelihood of various outcomes in favor of intuitive judgments based on familiarity or assumptions tied to specific characteristics.

Understanding representativeness bias is crucial, as it highlights how our cognitive shortcuts can lead to misjudgments in everyday decision-making processes, particularly in situations involving uncertainty.