COGNITIVE BIASES AND HEURISTICS
Availability Heuristic
Type of bias
 Ease of recall
 Retrievability
 Presumed associations
 Familiarity effect
Representativeness Heuristic
 Insensitivity to base
rates
 Frequency information
vs singular information
 “Inside” vs “Outside”
Thinking
Self-Referent bias
 Insensitivity to sample size
 Misconceptions of chance
Gambler’s Fallacy
 Regression to the mean
Description
Judge events more easily recalled from memory – due to recency
or vividness - as more numerous then events less easily recalled,
but of equal frequency. e.g., risk of 400 mile plane <-> car trip.
Bias in event frequency assessment due to a memory structures
affecting the search process. e.g., words starting with “r” <->
words with “r” as the 3rd letter -> easier to find at the
beginning.
e.g., stores at the same location.
Overestimate the possibility of 2 events co-occurring based on #
of similar associations easily retrieved by experience or social
influence. e.g., young under 25’s with big families.
e.g., Familiarity of men <-> women effects;
Choice of client product & supplier -> bad press;
Performance evaluation – recency effect bias;
Frequency of adverts;
Memorability of risk <-> perceived riskiness.
Ignore base rates in assessment of likelihood of events based
when the descriptive information is given – even if irrelevant.
e.g., Mark completing his MBA, interested in arts & wanted to
be a musician -> seeks job in: arts mgmt. or mgmt. consulting?
Ignoring or overlooking of base rates.
e.g. estimates completion of book or dissertation within a
shorter period than it takes others to do.
“Hot” – “Cold” cognitions.
Consumer Report – “Volvo effect”.
Estimations of time to perform and complete tasks.
“This won’t happen to me”
Lack of appreciation of sample size in assessing reliability of
sample information. e.g., Colt (66 over 60 days <-> Dodge (22
over 50 days); preference as a function of days observed.
e.g., Chances of making it to the NBA.
Expect a sequence of data to by a random process -> will look
random: even if sequence is too short for those expectations to
be statistically valid (a misconception of connectedness).
e.g., Basketball shooting: “hot hand”, “on a roll”, winning
streak”;
e.g., THTHTH <-<HHHTTT on throwing a dice
Ignore that extreme events tend to regress to the mean in
subsequent trials. e.g., pilot school evaluations of candidates.
 Anchoring and Adjustment Heuristic
 Anchoring & Adjustment Insufficient anchor adjustment – estimates values based on
Heuristic initial value (past events), random assignments, or available
info - makes insufficient adjustments from anchor point for
estimating final value.
 Overconfidence Tendency to be overconfident - infallibility of judgement when
Heuristic answering moderate to hard questions.
 Optimistic bias Stand out from normal distribution - driving; health status;
precautions, etc.
 Gambler’s Curse Buyer’s illusion of winning success yet ignorant of actual utility
of the seller (“red line”)..