Navigating AI Fallibility: Examining People's Reactions and Perceptions of AI after Encountering Personality Misrepresentations

Many hyper-personalized AI systems profile people's characteristics (e.g., personality traits) to provide personalized recommendations. These systems are increasingly used to facilitate interactions among people, such as providing teammate recommendations. Despite improved accuracy, such systems are not immune to errors when making inferences about people's most personal traits. These errors manifested as AI misrepresentations. However, the repercussions of such AI misrepresentations are unclear, especially on people's reactions and perceptions of the AI. We present two studies to examine how people react and perceive the AI after encountering personality misrepresentations in AI-facilitated team matching in a higher education context. Through semi-structured interviews (n=20) and a survey experiment (n=198), we pinpoint how people's existing and newly acquired AI knowledge could shape their perceptions and reactions of the AI after encountering AI misrepresentations. Specifically, we identified three rationales that people adopted through knowledge acquired from AI (mis)representations: AI works like a machine, human, and/or magic. These rationales are highly connected to people's reactions of over-trusting, rationalizing, and forgiving of AI misrepresentations. Finally, we found that people's existing AI knowledge, i.e., AI literacy, could moderate people's changes in their trust in AI after encountering AI misrepresentations, but not changes in people's social perceptions of AI. We discuss the role of people's AI knowledge when facing AI fallibility and implications for designing responsible mitigation and repair strategies.