Behavioral biases
| | | |
|
| Cognitive Errors (*1) |
| Belief Perseverance Bias (*3) |
| - conservatism (In Bayesian terms, they tend to overweight the base rates and underweight the new information, resulting in revised beliefs about probabilities and outcomes that demonstrate an underreaction to the new information.)
- confirmation ((1) give more weight to evidence that supports our beliefs and (2) ignore or modify evidence that conflicts with our beliefs)
- representativeness (classify new information based on past experiences and classifications)
- illusion of control (people tend to believe that they can control or influence outcomes when, in fact, they cannot)
- hindsight (People may see past events as having been predictable and reasonable to expect.)
|
| | Information-Processing Bias (*4) |
| - anchoring and adjustment (When required to estimate a value with unknown magnitude, people generally begin by envisioning some initial default number—an “anchor”—which they then adjust up or down to reflect subsequent information and analysis. People place undue weight on the anchor)
- mental accounting (People treat one sum of money differently from another equal-sized sum based on which mental account the money is assigned to.)
- framing (A person answers a question differently based on the way in which it is asked (framed).)
- availability (People take a heuristic (sometimes called a rule of thumb or a mental shortcut) approach to estimating the probability of an outcome based on how easily the outcome comes to mind)
|
| Emotional Bias (*2) |
| |
| - loss aversion (People tend to strongly prefer avoiding losses as opposed to achieving gains.)
- overconfidence (People demonstrate unwarranted faith in their own intuitive reasoning, judgments, and/or cognitive abilities. This overconfidence may be the result of overestimating knowledge levels, abilities, and access to information.)
- self-control (People fail to act in pursuit of their long-term, overarching goals because of a lack of self-discipline. There is an inherent conflict between short-term satisfaction and achievement of some long-term goals.)
- status quo (people do nothing (i.e., maintain the “status quo”) instead of making a change. Given no apparent problem requiring a decision, the status quo is maintained.)
- endowment (People value an asset more when they hold rights to it than when they do not.)
- regret aversion (People tend to avoid making decisions that will result in action out of fear that the decision will turn out poorly. Simply put, people try to avoid the pain of regret associated with bad decisions.)
|
(*1) faulty reasoning - easily corrected
(*2) feelings - harder to correct
(*3) inclination to maintain beliefs
(*4) information being processed and used illogically or irrationally
