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Transcript

COMMONCognitiveBiases

1. Confirmation Bias

2. Optimism Bias

3. Sunk Cost Fallacy

4. Hindsight Bias

9. Anchoring Bias

10. WYSIATI

11. Loss Aversion

12. Substitution Phenomenon

7. Endowment Effect

8. Representative Heuristic

5. Availability Heuristic

6. Framing Effect

BACK

Representative Heuristic

The description of Linda makes the idea of her being a feminist representative or typical. So, when people assess probability, they often go by resemblance (how much the description matches the stereotype) rather than logical statistics.

  • Plausibility = The quality of an argument or proposition being likely or credible, based on either preliminary evidence or its alignment with one's existing beliefs and experiences. It does not necessarily mean that the proposition is true, but rather that it appears reasonable or believable in a given context.
  • Probability = A quantitative measure, typically expressed as a percentage between 0% and 100%, that represents the likelihood or chance of a particular event occurring. It is a mathematical assessment based on known or estimated parameters, with a value of 0% indicating impossibility and 100% indicating certainty.

Example: Imagine you're asked to assess a complex economic policy and its impact on the country's overall economy. Instead of diving into a detailed analysis of the policy's components and their potential consequences, you simply rely on your general impression of the current state of the economy (e.g., whether you think the economy is doing well or poorly) to answer the question. In this case, you're substituting the more complex assessment with a simpler one based on your general perception of the current economic situation. This substitution can lead to an oversimplified or biased evaluation of the policy's effects.

Replacing a complex question with a simpler one without realizing it.

Substitution Phenomenon

Example: Placing a higher value on a car you already own when considering selling it compared to the value you'd assign if you were looking to purchase the same car from someone else.

Valuing things more when they belong to us.

Endowment Effect

Example: After a stock market crash, claiming that you knew it was going to happen all along, despite not having taken any action to protect your investments beforehand.

Believing, after an event has occurred, that one would have predicted or expected the outcome.

Hindsight Bias

Example: Forming opinions about a complex political issue based solely on a single news article you've read without considering a broader range of information and perspectives.

Assuming all the information available is all there is to know about a topic

WYSIATI (What You See Is All There Is)

Example: Continuing to watch a boring movie at the cinema just because you've already paid for the ticket, even if your time and enjoyment could be better spent elsewhere.

Continuing a behavior or endeavor based on previously invested resources (time, money, etc.), even if it's not the best decision.

Sunk Cost Fallacy

Example: A person underestimating the time and cost required for a home renovation project, assuming it will be completed faster and cost less than it actually does.

Overestimating positive outcomes and underestimating negative ones.

Optimism Bias

Example: Being unwilling to sell a stock at a loss, even when it's clear that holding onto it might result in even greater losses, because people tend to value avoiding losses more than acquiring gains.

The tendency to prefer avoiding losses to acquiring equivalent gains.

Loss Aversion

Example: Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a students she was very concerned with issues of social justice, and also participated in anti nuclear war demonstrations.Which of these is most likely true about Linda:

  • She is a bank teller
  • She is a bank teller who is active in the feminist movement?

Judging the probability of an event based on how similar it is to a prototype. a. Kahneman uses this exmaple in Thinking Fast and Slow:

Representative Heuristic

Next

Example: Negotiating the price of a used car based on the initial asking price set by the seller, even if it's unreasonably high, rather than independently assessing the car's value.

The tendency to rely heavily on the first piece of information encountered (the "anchor") when making decisions.

Anchoring Bias

Example: An individual who believes in climate change only seeking out news articles and research that support their viewpoint and ignoring or dismissing any contradictory information.

The tendency to search for, interpret, favor, and recall information in a way that confirms or strengthens one's prior personal beliefs or hypotheses.

Confirmation Bias

Example: Believing that a particular restaurant must be great because you see it frequently advertised on billboards, even if you have never actually tried their food.

Overestimating the importance of information that is available, typically due to recent exposure.

Availability Heuristic

Example: Responding differently to a medical treatment when it is described as having a 70% success rate versus when it is presented as having a 30% failure rate, even though the information is the same.

Drawing different conclusions from the same information depending on how it's presented.

Framing Effect