Decision-Making and Behavioural Biases

All decisions made by humans have biases.  It is important that when making important decisions that we seek to understand how biases affect those decsions.  The following is an extensive list of biases.

Many of these biases are studied for how they affect belief formation and business decisions and scientific research.

Bandwagon effect

The tendency to do (or believe) things because many other people do (or believe) the same. Related to groupthink, herd behaviour, and manias.
Bias blind spot The tendency not to compensate for one’s own cognitive biases.
Choice-supportive bias The tendency to remember one’s choices as better than they actually were.
Confirmation bias The tendency to search for or interpret information in a way that confirms one’s preconceptions.
Congruence bias The tendency to test hypotheses exclusively through direct testing, in contrast to tests of possible alternative hypotheses.
Contrast effect The enhancement or diminishment of a weight or other measurement when compared with recently observed contrasting object.
Déformation professionnelle The tendency to look at things according to the conventions of one’s own profession, forgetting any broader point of view.
Endowment effect “The fact that people often demand much more to give up an object than they would be willing to pay to acquire it”.
Extreme aversion Most people will go to great lengths to avoid extremes. People are more likely to choose an option if it is the intermediate choice.
Focusing effect Prediction bias occurring when people place too much importance on one aspect of an event; causes error in accurately predicting the utility of a future outcome.
Framing By using a too narrow approach or description of the situation or issue.
Hyperbolic discounting The tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs, the closer to the present both payoffs are.
Illusion of control The tendency for human beings to believe they can control or at least influence outcomes that they clearly cannot.
Impact bias The tendency for people to overestimate the length or the intensity of the impact of future feeling states.
Information bias The tendency to seek information even when it cannot affect action.
Irrational escalation The tendency to make irrational decisions based upon rational decisions in the past or to justify actions already taken.
Loss aversion “The disutility of giving up an object is greater than the utility associated with acquiring it”. (see also sunk cost effects and endowment effect).
Neglect of probability The tendency to completely disregard probability when making a decision under uncertainty.
Mere exposure effect The tendency for people to express undue liking for things merely because they are familiar with them.
Omission bias The tendency to judge harmful actions as worse, or less moral, than equally harmful omissions (inactions).
Outcome bias The tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.
Planning fallacy The tendency to underestimate task-completion times.
Post-purchase rationalisation The tendency to persuade oneself through rational argument that a purchase was a good value.
Pseudocertainty effect The tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes.
Reactance The urge to do the opposite of what someone wants you to do out of a need to resist a perceived attempt to constrain your freedom of choice.
Recall bias  In psychology, recall bias (or reporting bias) is a type of systematic bias which occurs when the way a survey respondent answers a question is affected not just by the correct answer, but also by the respondent’s memory. This can affect the results of the survey. As a hypothetical example, suppose that a survey in 2005 asked respondents whether they believed that O.J. Simpson had killed his wife. Respondents who believed him innocent might be more likely to have forgotten about the case, and therefore to state no opinion, than respondents who thought him guilty. If this is the case, then the survey would find a higher-than-accurate proportion of people who believed that O.J. did kill his wife.Relatedly but distinctly, the term might also be used to describe an instance where a survey respondent intentionally responds incorrectly to a question about their personal history which results in response bias. As a hypothetical example, suppose that a researcher conducts a survey among women of group A, asking whether they have had an abortion, and the same survey among women of group B.

If the results are different between the two groups, it might be that women of one group are less likely to have had an abortion, or it might simply be that women of one group who have had abortions are less likely to admit to it. If the latter is the case, then this would skew the survey results; this is a kind of response bias. (It is also possible that both are the case: women of one group are less likely to have had abortions, and women of one group who have had abortions are less likely to admit to it. This would still affect the survey statistics.)

 

Selective perception The tendency for expectations to affect perception.
Status quo bias The tendency for people to like things to stay relatively the same (see also Loss aversion and Endowment effect).
Unit bias The tendency to want to finish a given unit of a task or an item with strong effects on the consumption of food in particular
Von Restorff effect The tendency for an item that “stands out like a sore thumb” to be more likely to be remembered than other items.
Zero-risk bias Preference for reducing a small risk to zero over a greater reduction in a larger risk.
Biases in probability and belief
Ambiguity effect The avoidance of options for which missing information makes the probability seem “unknown”.
Anchoring The tendency to rely too heavily, or “anchor,” on a past reference or on one trait or piece of information when making decisions.
Anthropic bias The tendency for one’s evidence to be biased by observation selection effects.
Attentional bias Neglect of relevant data when making judgments of a correlation or association.
Availability heuristic A biased prediction, due to the tendency to focus on the most salient and emotionally-charged outcome.
Clustering illusion The tendency to see patterns where actually none exist.
Conjunction fallacy The tendency to assume that specific conditions are more probable than general ones.
Gambler’s fallacy The tendency to assume that individual random events are influenced by previous random events. For example, “i’ve flipped heads with this coin five times consecutively, so the chance of tails coming out on the sixth flip is much greater than heads.”
Hindsight bias Sometimes called the “I-knew-it-all-along” effect, the inclination to see past events as being predictable.
Illusory correlation Beliefs that inaccurately suppose a relationship between a certain type of action and an effect.
Ludic fallacy The analysis of chance related problems with the narrow frame of games. Ignoring the complexity of reality, and the non-gaussian distribution of many things.
Neglect of prior base rates effect The tendency to fail to incorporate prior known probabilities which are pertinent to the decision at hand.
Observer-expectancy effect When a researcher expects a given result and therefore unconsciously manipulates an experiment or misinterprets data in order to find it (see also subject-expectancy effect).
Optimism bias The systematic tendency to be over-optimistic about the outcome of planned actions.
Overconfidence effect The tendency to overestimate one’s own abilities.
Positive outcome bias A tendency in prediction to overestimate the probability of good things happening to them (see also wishful thinking, optimism bias and valence effect).
Primacy effect The tendency to weigh initial events more than subsequent events.
Recency effect The tendency to weigh recent events more than earlier events (see also peak-end rule).
Reminiscence bump The effect that people tend to recall more personal events from adolescence and early adulthood than from other lifetime periods.
Rosy retrospection The tendency to rate past events more positively than they had actually rated them when the event occurred.
Subadditivity effect The tendency to judge probability of the whole to be less than the probabilities of the parts.
Telescoping effect The effect that recent events appear to have occurred more remotely and remote events appear to have occurred more recently.
Texas sharpshooter fallacy The fallacy of selecting or adjusting a hypothesis after the data are collected, making it impossible to test the hypothesis fairly.
Hawthorne effect Refers to a phenomenon which is thought to occur when people observed during a research study temporarily change their behavior or performance (this can also be referred to as demand characteristics).

Social Biases

attributional biases. Attributional biases typically take the form of actor/observer differences: people involved in an action (actors) view things differently from people not involved (observers). These discrepancies are often caused by asymmetries in availability (frequently called “salience” in this context). For example, the behavior of an actor is easier to remember (and therefore more available for later consideration) than the setting in which he found himself; and a person’s own inner turmoil is more available to himself than it is to someone else. As a result, our judgments of attribution are often distorted along those lines.In some experiments, for example, subjects were shown only one side of a conversation or were able to see the face of only one of the conversational participants. Whomever the subjects had a better view of were judged by them as being more important and more influential, and as having had a greater role in the conversation.

There is some evidence that more intelligent and socially apt people are more likely to make errors in attribution.

Perhaps the best known attributional bias is the fundamental attribution error.

 

Actor-observer bias the tendency for explanations for other individual’s behaviors to overemphasise the influence of their personality and underemphasise the influence of their situation. This is coupled with the opposite tendency for the self in that one’s explanations for their own behaviors overemphasise their situation and underemphasise the influence of their personality. (see also fundamental attribution error).
Dunning-Kruger effect “…when people are incompetent in the strategies they adopt to achieve success and satisfaction, they suffer a dual burden: Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realise it. Instead, …they are left with the mistaken impression that they are doing just fine.”[4](see also Lake Wobegon effect, and overconfidence effect).
Egocentric bias occurs when people claim more responsibility for themselves for the results of a joint action than an outside observer would.
Forer effect (aka Barnum Effect) the tendency to give high accuracy ratings to descriptions of their personality that supposedly are tailored specifically for them, but are in fact vague and general enough to apply to a wide range of people. For example, horoscopes.
False consensus effect the tendency for people to overestimate the degree to which others agree with them.
Fundamental attribution error the tendency for people to over-emphasise personality-based explanations for behaviors observed in others while under-emphasising the role and power of situational influences on the same behavior (see also actor-observer bias, group attribution error, positivity effect, and negativity effect).
Halo effect the tendency for a person’s positive or negative traits to “spill over” from one area of their personality to another in others’ perceptions of them (see also physical attractiveness stereotype).
Herd instinct Common tendency to adopt the opinions and follow the behaviors of the majority to feel safer and to avoid conflict.
Illusion of asymmetric insight people perceive their knowledge of their peers to surpass their peers’ knowledge of them.
Illusion of transparency people overestimate others’ ability to know them, and they also overestimate their ability to know others.
Ingroup bias the tendency for people to give preferential treatment to others they perceive to be members of their own groups.
Just-world phenomenon the tendency for people to believe that the world is “just” and therefore people “get what they deserve.”
Lake Wobegon effect the human tendency to report flattering beliefs about oneself and believe that one is above average (see also worse-than-average effect, and overconfidence effect).
Notational bias a form of cultural bias in which a notation induces the appearance of a nonexistent natural law.
Outgroup homogeneity bias individuals see members of their own group as being relatively more varied than members of other groups.
Personality attribution Mentally cataloging a person by a “personality” label. Such (broad) labels are suggested by
Projection bias the tendency to unconsciously assume that others share the same or similar thoughts, beliefs, values, or positions.
Self-serving bias the tendency to claim more responsibility for successes than failures. It may also manifest itself as a tendency for people to evaluate ambiguous information in a way beneficial to their interests (see also group-serving bias).
Self-fulfilling prophecy the tendency to engage in behaviors that elicit results which will (consciously or subconsciously) confirm our beliefs.
System justification the tendency to defend and bolster the status quo, i.e. existing social, economic, and political arrangements tend to be preferred, and alternatives disparaged sometimes even at the expense of individual and collective self-interest.
Trait ascription bias the tendency for people to view themselves as relatively variable in terms of personality, behavior and mood while viewing others as much more predictable.

Memory Errors

Further information: Memory bias Memory is the persistence of learning over time through the storage and retrieval of information.In order to recall, 3 things must happen:

• Encoding- processing the information into the memory system

• Storage- retaining the encoded information over time

• Retrieval- Getting the information out of storage

How we encode memories:

Automatic- encoding that happens unconsciously

• Effortful- encoding that requires attention, focus and conscious effort

Rehearsal- conscious repetition of information

Encoding Meaning

3 Types:

Visual- encoding picture images Imagery eg. Capital letters

Acoustic- encoding the sound of the words -rhyming (If it doesn’t fit you must acquit)

Semantic- encoding the meaning of the words or the idea

Organising Info for Later Retrieval

Mnemonic Devices- memory aides that typically involve techniques that use organisational devices that can involve visual and acoustic codes

• Chunking- organizing info into meaningful and manageable units – increases the amount of info that can be stored in your short-term memory

– Acronyms

Sensory Memory ► Short Term Memory ► Long-Term Memory

• Sensory Memory- the immediate, initial recording of sensory info into the memory system

• Short-Term Memory- holds a few items briefly before the info is forgotten or stored

– Working Memory- focuses more on the processing of briefly stored info

Can hold info up to 30 seconds

• Long-Term Memory- relatively limitless and permanent storehouse of the memory system

Retrieval

Recall- retrieving previously learned information

Recognition- only need to identify information learned earlier

In psychology and cognitive science, a memory bias is a cognitive bias that either enhances or impairs the recall of a memory (either the chances that the memory will be recalled at all, or the amount of time it takes for it to be recalled, or both), or that alters the content of a reported memory. There are many types of memory bias, including the following List of Memory Biases

List of Memory Biases

Beneffectance Perceiving oneself as responsible for desirable outcomes but not responsible for undesirable ones. (term coined by Greenwald, 1980)
Choice-supportive bias Remembering chosen options as having been better than rejected options (Mather, Shafir & Johnson, 2000).
Change bias After an investment of effort in producing change, remembering one’s past performance as more different than it actually was (Schacter, 1999)
Context effect That cognition and memory are dependent on context, such that out-of-context memories are more difficult to retrieve than in-context memories (e.g., recall time and accuracy for a work-related memory will be lower at home, and vice versa).
Cryptomnesia A form of misattribution where a memory is mistaken for imagination, because there is no subjective experience of it being a memory.
Egocentric bias Recalling the past in a self-serving manner, e.g. Remembering one’s exam grades as being better than they were, or remembering a caught fish as being bigger than it really was
False memory A false memory is a memory of an event that did not happen or is a distortion of an event that did occur as determined by externally corroborated facts.
Hindsight bias The inclination to see past events as being predictable; also called the “I-knew-it-all-along” effect.
Humor effect That humorous items are more easily remembered than non-humorous ones, which might be explained by the distinctiveness of humor, the increased cognitive processing time to understand the humor, or the emotional arousal caused by the humor.
Infantile amnesia The retention of few memories from before the age of two years.
Generation effect That self-generated information is remembered best.
Lag effect Allowing enough time for understanding and storing separate elements into memory.  A longer lag between items on a list allows a greater ability to effectively sore (and hence retrieve) an item.  Insufficient lag time may distort some aspect of the memory
Leveling and Sharpening Memory distortions introduced by the loss of details in a recollection over time, often concurrent with sharpening or selective recollection of certain details that take on exaggerated significance in relation to the details or aspects of the experience lost through leveling. Both biases may be reinforced over time, and by repeated recollection or re-telling of a memory. (e.g., koriat,­ goldsmith and ­pansky, 2000)
Levels-of-processing effect That different methods of encoding information into memory have different levels of effectiveness (Craik & Lockhart, 1972).
List-length effect A lengthy list of elements is harder to memorise correctly than a shorter one.
Mere exposure effect That familiarity increases liking.
Misinformation effect That misinformation affects people’s reports of their own memory.
Misattribution When information is retained in memory but the source of the memory is forgotten. One of Schacter’s (1999) seven sins of memory, misattribution was divided into Source confusion, Cryptomnesia and False recall/false recognition
Modality effect That memory recall is higher for the last items of a list when the list items were received via speech than when they were received via writing.
Mood congruent memory bias The improved recall of information congruent with one’s current mood.
Next-in-line effect Next-in-line Effect- when going around a circle saying names you are most likely to forget the person’s name in front of you
Part-list cueing effect That being shown some items from a list makes it harder to retrieve the other items (e.g., Slamecka, 1968).
Persistence The unwanted recurrence of memories of a traumatic event
Picture superiority effect That concepts are much more likely to be remembered experientially if they are presented in picture form than if they are presented in word form.
Positivity effect That older adults favor positive over negative information in their memories.
Processing difficulty effect
Primacy effect That the first items on a list show an advantage in memory.
Recency effect That the last items on a list show an advantage in memory.
Reminiscence bump The recalling of more personal events from adolescence and early adulthood than personal events from other lifetime periods (Rubin, Wetzler & Nebes, 1986; Rubin, Rahhal & Poon, 1998).
Rosy retrospection The remembering of the past as having been better than it really was.
Selective Memory Reception or retrieval of only some of the events in an experience. 
Serial position effect That items at the beginning of a list are the easiest to recall, followed by the items near the end of a list; items in the middle are the least likely to be remembered.
Self-generation effect That people are better able to recall memories of statements that they have generated than similar statements generated by others.
Self-relevance effect That memories considered self-relevant are better recalled than other, similar information.
Source Confusion Misattributing the source of a memory, e.g. Misremembering that one saw an event personally when actually it was seen on television
Spacing effect That information is better recalled if exposure to it is repeated over a longer span of time. We remember more when our rehearsal is spread over time
Squishing To squeeze or crush together memories
Stereotypical bias Memory distorted towards stereotypes (e.g. Racial or gender), e.g. “black-sounding” names being misremembered as names of criminals (Schacter, 1999)
Suffix effect The weakening of the recency effect in the case that an item is appended to the list that the subject is not required to recall (Morton, Crowder & Prussin, 1972).
Suggestibility A form of misattribution where ideas suggested by a questioner are mistaken for memory.
Telescoping effect The tendency to displace recent events backward in time and remote events forward in time, so that recent events appear to be more remote, and remote events, more recent.
Testing effect That frequent testing of material that has been committed to memory improves memory recall.
Tip of the Tongue phenomenon When a subject is able to recall parts of an item, or related information, but is frustratingly unable to recall the whole item. This is thought to be an instance of “blocking” where multiple similar memories are being recalled and interfere with each other (Schacter, 1999)
Verbatim effect That the “gist” of what someone has said is better remembered than the verbatim wording (Poppenk, Walia, Joanisse, Danckert, & Köhler, 2006).
Von Restorff effect That an item that sticks out is more likely to be remembered than other items (von Restorff, 1933).
Zeigarnik effect That uncompleted or interrupted tasks are remembered better than completed ones.

Common Theoretical Causes Of Some Cognitive Biases

Attribution theory, Attribution theory is a social psychology theory developed by Fritz Heider, Harold Kelley, Edward E. Jones, and Lee Ross.The theory is concerned with the ways in which people explain (or attribute) the behavior of others, or themselves (self-attribution), with something else. It explores how individuals “attribute” causes to events and how this cognitive perception affects their motivation.

The theory divides the way people attribute causes to events into two types.

External” or “situational” attribution assigns causality to an outside factor, such as the weather, whereas “Internal” or “dispositional” attribution assigns causality to factors within the person, such as their own level of intelligence or other variables that make the individual responsible for the event.

Self-serving bias or Fundamental Attribution Error

People often make self serving attributions. So, if something good happens to themselves or someone they like, they tend to see it as a result of their own, stable dispositions. (“I managed the test because I’m so intelligent”), and when bad things happen to themselves or people they like they are more likely to make external unstable attributions (“I did badly on the test because it was so hard, and I had a headache”). Similarly, they will attribute good things happening to a person that they do not like to a situational factor (they got lucky) and something bad happening to a dispositional factor (they are stupid). This is also known as Fundamental Attribution Error.

There seem to be features that people look for when making attributions, such as universality (“does everyone do this, or just the person I’m watching?”) and uniqueness (“do they do it this way every time, or was this just an aberration?”).

There is evidence from people like Srull and Wyer and John Bargh that when people see an act, they automatically make personality attributions, and start mentally cataloging that person by that label. Dan Gilbert has a theory of attribution which says that, when you see people do something, you make an automatic fast attribution to their personality, and that, if circumstances warrant, you can then slowly “discount” the attribution to a feature of the environment (“whoa, he’s not a coward, even I would run away if a bear started gnawing on my arm like that”).

Attributions for events can change a person’s behavior, and many theories such as cognitive dissonance rely on it. So, for example, in a classic dissonance paradigm, if a person believes that they did something counterattitudinal (say, a student writing an essay in favour of raising tuition prices), because they chose to do it (i.e. they make an internal attribution), then they tend to change their mind and believe that they really do support higher tuition. If, however, they write that same counterattitudinal essay but they believe they were forced to write it (i.e. they make an external attribution for their behaviour), then they are unlikely to change their attitude. Similarly, if someone is paid for a job, they attribute the fact they are doing the job to the fact they are making money for it, rather than to intrinsic factors, such as enjoyment, and subsequently they will actually think that they enjoy the task less, and will be less likely to spontaneously choose to do it again in the future. Studies have shown that adding an external reward to a task previously rewarded only internally makes people less intrinsically motivated to perform that task.

However, in some circumstances, extrinsic factors can cause positive changes in behaviour. If an individual believes that they have earned the reward or punishment for intrinsic reasons, then that might effect a positive change in behaviour. It is when the reason for the reward is attributed to external factors that the behaviour change might not be in the desired direction.

 

Salience The salience of an item – be it an object, a person,  etc. – is its state or quality of standing out relative to neighboring items. Saliency detection is considered to be a key attentional mechanism that facilitates learning and survival by enabling organisms to focus their limited perceptual and cognitive resources on the most pertinent subset of the available sensory data. Saliency typically arises from contrasts between items and their neighborhood, such as a red dot surrounded by white dots, a flickering message indicator of an answering machine, or a loud noise in an otherwise quiet environment. Saliency detection is often studied in the context of the visual system, but similar mechanisms operate in other sensory systems.When attention deployment is driven by salient stimuli, it is considered to be bottom-up, memory-free, and reactive. Attention can also be guided by top-down, memory-dependent, or anticipatory mechanisms, such as when looking ahead of moving objects or sideways before crossing streets. Humans and other animals cannot pay attention to more than one or very few items simultaneously, so they are faced with the challenge of continuously integrating and prioritizing different bottom-up and top-down influences.
Cognitive dissonance, and related: Cognitive dissonance is a psychological term describing the uncomfortable tension that may result from having two conflicting thoughts at the same time, or from engaging in behavior that conflicts with one’s beliefs, or from experiencing apparently conflicting phenomena.In simple terms, it can be the filtering of information that conflicts with what you already believe, in an effort to ignore that information and reinforce your beliefs. In detailed terms, it is the perception of incompatibility between two cognitions, where “cognition” is defined as any element of knowledge, including attitude, emotion, belief, or behavior. The theory of cognitive dissonance states that contradicting cognitions serve as a driving force that compels the mind to acquire or invent new thoughts or beliefs, or to modify existing beliefs, so as to reduce the amount of dissonance (conflict) between cognitions. Experiments have attempted to quantify this hypothetical drive. Some of these have examined how beliefs often change to match behavior when beliefs and behavior are in conflict.

Leon Festinger first proposed the theory in 1957 , observing the counterintuitive belief persistence of members of a UFO doomsday cult and their increased proselytisation after the leader’s prophecy failed. The failed message of earth’s destruction, purportedly sent by aliens to a woman in 1956, became a disconfirmed expectancy that increased dissonance between cognitions, thereby causing most members of the impromptu cult to lessen the dissonance by accepting a new prophecy: that the aliens had instead spared the planet for their sake.

 

Impression management In sociology and social psychology, impression management is the process through which people try to control the impressions other people form of them. It is a goal-directed conscious or unconscious attempt to influence the perceptions of other people about a person, object or event by regulating and controlling information in social interaction. It is usually synonymous with self-presentation, if a person tries to influence the perception of their image.Impression management (IM) theory states that any individual or organisation must establish and maintain impressions that are congruent with the perceptions they want to convey to their publics (Goffman, 1959).

The idea that perception is reality is the basis for this sociological and social psychology theory, which is framed around the presumption that the other’s perceptions of you or your organisation become the reality from which they form ideas and the basis for intended behaviors.

Goffman presented Impression management dramaturgically, explaining the motivations behind complex human performances within a social setting based on a play metaphor (Dillard et al., 2000). The actor, shaped by the environment and target audience, sees interaction as a performance. The objective of the performance is to provide the audience with an impression consistent with the desired goals of the actor (Barnhart, 1994). In addition to these goals, individuals differ in responses from the interactional environment, some may be irresponsive to audience’s reactions while others actively respond to audience reactions in order to elicit positive results. These differences in response towards the environment and target audience is called self-monitoring. Another factor in impression management is self-verification, the act of comforming the audience to the person’s self-concept.

Self-perception theory Self-perception theory is an account of attitude change developed by psychologist, Daryl Bem. It asserts that we develop our attitudes by observing our own behavior and concluding what attitudes must have caused them.Self-perception theory differs from cognitive dissonance theory in that it does not hold that people experience a “negative drive state” called “dissonance” which they seek to relieve. Instead, people simply infer their attitudes from their own behavior in the same way that an outside observer might. Self-perception theory is a special case of attribution theory.

Bem ran his own version of Festinger and Carlsmith’s famous cognitive dissonance experiment. Subjects listened to a tape of a man enthusiastically describing a tedious peg-turning task. Some subjects were told that the man had been paid $20 for his testimonial and another group was told that he was paid $1. Those in the latter condition thought that the man must have enjoyed the task more than those in the $20 condition. Bem argued that the subjects did not judge the man’s attitude in terms of cognitive dissonance phenomena, and that therefore any attitude change the man might have had in that situation was the result of the subject’s own self-perception.

An awareness of the characteristics that constitute one’s self-knowledge.

Cooley (1904)- made a looking glass model which was comprised of three components:

1) How we think we appear to others

2) How we think they evaluate that appearance

3) The resulting shame or pride we feel

Heuristics,: In psychology, heuristics are simple, efficient rules, hard-coded by evolutionary processes or learned, which have been proposed to explain how people make decisions, come to judgments, and solve problems, typically when facing complex problems or incomplete information. These rules work well under most circumstances, but in certain cases lead to systematic cognitive biases.For instance, people may tend to perceive more expensive beers as tasting better than inexpensive ones (providing the two beers are of similar initial quality or lack of quality and of similar style). This finding holds true even when prices and brands are switched; putting the high price on the normally relatively inexpensive brand is enough to lead subjects to perceive it as tasting better than the beer that is normally more expensive. One might call this “price implies quality” bias. (Cf. Veblen good.)

Theorised psychological heuristics

Well known:

Less well known:

 

 

Adaptive Bias Adaptive bias is the idea that the human brain has evolved to reason adaptively, rather than truthfully or even rationally, and that Cognitive bias may have evolved as a mechanism to reduce the overall cost of cognitive errors as opposed to merely reducing the number of cognitive errors, when faced with making a decision under conditions of uncertainty.When making decisions under conditions of uncertainty, two kinds of errors need to be taken into account – “false positives”, i.e. deciding that a risk or benefit exists when it does not, and “false negatives”, i.e. failing to notice a risk or benefit that exists. False positives are also commonly called “Type 1 errors“, and false negatives are called “Type 2 errors“.

Where the cost or impact of a type 1 error is much greater than the cost of a type 2 error (e.g. the water is safe to drink), it can be worthwhile to bias the decision making system towards making fewer type 1 errors, i.e. making it less likely to conclude that a particular situation exists. This by definition would also increase the number of type 2 errors. Conversely, where a false positive is much less costly than a false negative (blood tests, smoke detectors), it makes sense to bias the system towards maximising the probability that a particular (very costly) situation will be recognised, even if this often leads to the (relatively un-costly) event of noticing something that is not actually there.

Cognitive Bias can be expected to have developed in humans for cognitive tasks where:

  • Decision making is complicated by a significant signal-detection problem (i.e. when there is uncertainty)
  • The solution to the particular kind of decision making problem has had a recurrent effect on survival and fitness throughout evolutionary history
  • The costs of a “false positive” or “false negative” error dramatically outweighs the cost of the alternative type of error

 

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9 thoughts on “Decision-Making and Behavioural Biases

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