Psychology of Bias and Heuristics

Prospect Theory

• Describes how people make decisions involving risk and uncertainty, focusing on potential losses and gains.
• Emphasizes that losses have a greater emotional impact than an equivalent amount of gains, leading to risk-averse behavior.

The Intelligence Paradox

• Suggests that high cognitive abilities do not always correlate with sound judgment or decision-making.
• Intelligence may not fully compensate for cognitive biases that influence behavior.

Availability Heuristic

• A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.
• Can lead to errors in judgment based on the prominence or frequency of recalled events.

Attentional Bias

• The tendency to focus selectively on certain stimuli while ignoring others, influencing perceptions and decisions.
• Often reflects personal expectations or emotional states, affecting how information is processed.

The Illusory Truth Effect

• Occurs when repeated statements are perceived as more truthful, regardless of their actual veracity.
• Demonstrates the power of repetition in shaping beliefs and perceptions.

The Mere-Exposure Effect

• Suggests individuals tend to develop a preference for things merely because they are familiar with them.
• Increased exposure can enhance positive feelings towards people, objects, or ideas.

Mood Congruent Bias

• Refers to the tendency to recall memories that match one's current mood or emotional state.
• Affects how individuals interpret new information based on their emotional context.

Baader-Meinhof Phenomenon

• Also known as frequency illusion, it describes the phenomenon where an individual starts noticing something more frequently after first encountering it.
• Highlights how a person's focus can alter their perception of reality.

Empathy Gap

• A cognitive bias that underestimates the influence of emotional states on one's decisions and behaviors.
• Can lead to misjudgments about how one will feel or act in future emotional situations.

Omission Bias

• The tendency to judge harmful actions as worse than equally harmful inactions.
• Reflects a preference for inaction over action in ethical dilemmas based on perceived moral responsibility.

Von Restorff Effect

• The phenomenon where an item that stands out is more likely to be remembered than ordinary items.
• Emphasizes the importance of differentiation in memory retention and recall.

Focusing Effect

• Occurs when individuals place excessive weight on one aspect of an event while neglecting others, leading to skewed evaluations.
• Can influence decision-making by prioritizing certain information over a more comprehensive view.

Framing Effect

• Describes how the way information is presented can significantly influence decision-making and judgment.
• Differentiate outcomes based on whether the information is framed in positive or negative terms.

Weber-Fechner Law

• A principle in psychophysics that explains the relationship between stimulus magnitude and perceived intensity.
• Suggests that perceived changes in a stimulus correspond to the logarithm of its actual change.

Confirmation Bias

• The tendency to search for, interpret, and remember information in a way that confirms one’s preexisting beliefs or hypotheses.
• Can perpetuate misinformation and hinder objective analysis of evidence.

Semmelweis Reflex

• A metaphor for the social tendency to reject new evidence or knowledge that contradicts established norms or beliefs.
• Illustrates how new ideas can be dismissed even when they are scientifically valid.

Bias Blind Spot

• The inability to recognize one's own biases while being able to identify biases in others.
• Highlights the challenges in achieving self-awareness and objective reasoning.

Clustering Illusion

• The perception that random patterns or clusters exist in data, suggesting an order that isn’t really there.
• Affects how people interpret statistics and probability.

Naive Realism

• The belief that one perceives the world objectively and that those who see things differently are uninformed or biased.
• Underlines the challenges in resolving conflicts due to differing perceptions.

Gambler's Fallacy

• The mistaken belief that past random events affect the probabilities of future random events.
• Commonly occurs in gambling contexts where players assume trends will continue.

Hot-Hand Fallacy

• The belief that a person who experiences success with a random event has a greater chance of further success in additional attempts.
• Often seen in sports and betting scenarios.

The Bandwagon Effect

• Refers to the phenomenon where individuals adopt certain behaviors or beliefs because many others are doing the same.
• Can lead to groupthink and conformity.

Zero-Sum Bias

• A belief that a situation is a zero-sum game, where one person's gain is inherently another's loss.
• Affects competitive dynamics and negotiation strategies.

Hindsight Bias

• Describes the inclination to see events as having been predictable after they have already happened.
• Can distort memory and learning processes.

Outcome Bias

• The tendency to judge a decision based on its outcome rather than on the quality of the decision at the time it was made.
• Undermines objective evaluation of choices.

Restraint Bias

• The overestimation of one’s capacity to resist temptation, leading to poor long-term decision-making.
• Commonly associated with impulsive behavior in various contexts.

Overconfidence Effect

• A cognitive bias that leads individuals to overestimate their own abilities, knowledge, or predictions.
• Often seen in fields ranging from finance to personal assessments.

Dunning-Kruger Effect

• A cognitive bias in which individuals with low ability overestimate their skills, while those with high ability underestimate theirs.
• Highlights challenges in self-assessment and awareness.

Peltzman Effect

• The concept that safety measures can lead to riskier behavior because individuals feel more secure.
• Explains potential unintended consequences of regulations or safety interventions.

Hyperbolic Discounting

• A behavioral economics concept where individuals prefer smaller, immediate rewards over larger, delayed rewards.
• Influences decision-making in contexts like savings and investments.

Sunk Cost Fallacy

• A reasoning error where individuals continue an endeavor once an investment in money, effort, or time has been made, regardless of future outcome.
• Can lead to irrational decision-making.

Irrational Escalation

• A pattern where individuals continue on a failing course of action because of previously invested resources.
• Related to the sunk cost fallacy.

Zero Risk Bias

• The preference for reducing small risks to zero even when greater risks remain unchanged.
• Reflects the human inclination towards certainty in risk management.

The Disposition Effect

• The tendency to sell assets that have increased in value while keeping assets that have dropped in value.
• Influences investor behavior and market dynamics.

Pseudo-certainty Effect

• The tendency to prefer certain outcomes over probable ones when the perceived values are the same, even if probabilities differ.
• Influences risk-taking behaviors in uncertain situations.

Backfire Effect

• The phenomenon where individuals strengthen their existing beliefs when presented with contrary evidence.
• Demonstrates challenges in changing opinions and belief systems.

Reverse Psychology

• A tactic where positive outcomes are achieved by advocating the opposite of what one truly desires, relying on contrarian behavior.
• Often employed in behavioral interventions.

The Less-Is-Better Effect

• The notion that people may prefer smaller quantities of a product or experience if they perceive it as higher quality, despite having the option for larger quantities.
• Impacts consumer choices and marketing strategies.

Prospect Theory

• Describes how people make decisions based on potential losses and gains relative to a reference point, rather than final outcomes.
• Individuals exhibit loss aversion, valuing losses more than equivalent gains, leading to risk-averse behavior when facing potential gains and risk-seeking behavior when facing potential losses.

The Intelligence Paradox

• Refers to the observation that higher IQ does not always correlate with better decision-making or practical intelligence.
• Highlights the discrepancy between cognitive ability and real-world performance, suggesting that emotional and social factors play critical roles in intelligence applications.

Availability Heuristics

• A cognitive shortcut where individuals judge the probability of events based on how easily examples come to mind.
• Often leads to overestimation of risks associated with dramatic events (like plane crashes) while underestimating more common risks (like car accidents).

Attentional Bias

• The tendency to focus on certain stimuli while ignoring others, which can distort perception and decision-making.
• Can be influenced by personal experiences, expectations, and social context, leading to selective attention to information that confirms pre-existing beliefs.

The Illusory Truth Effect

• The phenomenon in which repeated exposure to a statement increases the likelihood of it being perceived as true.
• Even false information can become more believable when it is presented multiple times.

The Mere-Exposure Effect

• A psychological phenomenon where repeated exposure to a person, object, or idea leads to increased liking.
• Based on the principle that familiarity breeds comfort, influencing preferences in various domains, such as advertising and relationships.

Mood Congruent Bias

• The tendency to recall memories or information that is consistent with one’s current mood or emotional state.
• This bias can affect decision-making and perceptions, leading individuals to interpret events in a way that aligns with their emotional feelings.

Baader Meinhof Phenomenon

• Also known as frequency illusion; occurs when someone learns about something new and then starts noticing it everywhere.
• Reflects the brain's selective attention and cognitive biases, creating an illusion of increased occurrence.

Empathy Gap

• A cognitive bias where individuals underestimate the influence of emotional states on their own and others' decision-making processes.
• Leads to difficulties in understanding the emotional responses of others, especially when in a different emotional state.

Omission Bias

• A tendency to judge harmful actions as worse than equally harmful inactions, leading to a preference for the status quo.
• This bias can affect moral decision-making, promoting inaction over action in situations with potential harm.

Von Restorff Effect

• A cognitive phenomenon where an item that stands out is more likely to be remembered than similar items.
• Also known as the isolation effect, it highlights the importance of distinctive features in memory retention.

Focusing Effect

• The tendency to place excessive importance on one aspect of an event while ignoring other relevant factors.
• Can lead to skewed perceptions of reality, often influencing judgments or decisions disproportionately.

Framing Effect

• How information is presented (the “frame”) significantly affects decisions and judgments.
• Different wording or context can lead to different interpretations and choices, demonstrating the power of subtle cues.

The Weber-Fechner Law

• Describes the relationship between stimulus and perception; as stimuli increase, the perceived change must also increase to maintain a constant perception.
• Fundamental in understanding sensory perception and psychological thresholds.

Confirmation Bias

• The tendency to search for, interpret, and remember information in a way that confirms one’s preexisting beliefs.
• Leads individuals to overlook or dismiss contradictory evidence, reinforcing erroneous conclusions.

Semmelweis Reflex

• The rejection of new evidence or new knowledge that contradicts established norms or beliefs.
• Named after Ignaz Semmelweis, whose discoveries about handwashing were initially dismissed by the medical community.

Bias Blind Spot

• The inability to recognize one’s own biases while being able to identify biases in others.
• This cognitive bias can lead to overconfidence in one's judgments and decisions.

Clustering Illusion

• The perception of patterns in random data, causing people to see meaningful groupings or trends where none exist.
• Common in gambling and finance, leading to faulty interpretations of chance events.

Naive Realism

• The belief that we perceive the world objectively, and that those who disagree with us must be uninformed or biased.
• This bias can contribute to polarization in opinions and conflicts in communication.

Gambler's Fallacy

• The mistaken belief that past random events can influence future ones, leading individuals to make erroneous bets.
• Example: believing that a series of losses increases the chance of a win in games of chance, despite each event being independent.

Hot-Hand Fallacy

• The belief that a person who experiences success has a greater chance of continued success in future similar attempts.
• Common in sports contexts, where players are presumed to be 'on fire' after a series of successful performances.

The Bandwagon Effect

• The phenomenon where people adopt beliefs or behaviors because they perceive that others are doing so.
• Often seen in trends, social movements, and political opinions, leading to conformity and groupthink.

Zero-Sum Bias

• The belief that one person's gain is inherently another person's loss, leading to competitive and often destructive behaviors.
• This mindset can hinder cooperation and promote conflict in negotiations and group dynamics.

Hindsight Bias

• The inclination to see events as having been predictable after they have already happened.
• Often described as the “I-knew-it-all-along” effect, it can distort personal perception of decision-making.

Outcome Bias

• Judging a decision based on its outcome rather than the quality of the decision at the time it was made.
• Can lead to skewed evaluations of actions and discourage risk-taking, impacting learning and future decisions.

Restraint Bias

• The tendency to overestimate one's ability to resist temptation or to control impulses in the future.
• This bias can affect planning and self-control, often leading to unexpected failures in managing desires.

Overconfidence Effect

• A cognitive bias in which an individual’s subjective confidence in their judgments is greater than their objective accuracy.
• Often leads to overestimation of knowledge, abilities, and chances of success.

Dunning-Kruger Effect

• A phenomenon where individuals with low ability at a task overestimate their competence, while those with high ability underestimate it.
• Demonstrates a disconnect between self-perception and actual skill level.

Peltzman Effect

• The theory that safety measures lead to increased risk-taking behavior because people feel more secure.
• Suggests that people's responses to risk can be adaptive and context-dependent.

Hyperbolic Discounting

• A cognitive bias that describes the tendency to prefer smaller, immediate rewards over larger, delayed rewards.
• Highlights how people struggle with making long-term decisions in favor of immediate gratification.

Sunk Cost Fallacy

• The inclination to continue an endeavor once an investment in money, effort, or time has been made, despite potential losses.
• This fallacy demonstrates how past investments can lead to irrational decision-making.

Irrational Escalation

• The commitment to a failing course of action due to previously invested resources, despite evidence indicating that the decision is unwise.
• Often seen in business contexts, leading to further losses instead of cutting losses.

Zero Risk Bias

• The preference for completely eliminating a risk rather than reducing it, even if the alternative reduction offers greater overall safety.
• This bias can lead to suboptimal decision-making in risk management.

The Disposition Effect

• Investors’ tendency to sell assets that have increased in value while holding onto those that have decreased, leading to suboptimal investment strategies.
• Influenced by emotional attachments and loss aversion.

Pseudo-certainty Effect

• A bias where people perceive certain outcomes in uncertain situations as more certain than they actually are.
• Often leads to suboptimal decision-making under uncertainty, favoring perceived certainties.

Backfire Effect

• A cognitive bias where individuals respond to disconfirming evidence by strengthening their beliefs.
• This effect illustrates how deep-seated beliefs can lead to the negation of contrary facts, perpetuating misinformation.

Reverse Psychology

• A persuasion technique where one advocates for the opposite of what they want to encourage a desired behavior through reactance.
• Often used in persuasion and motivational contexts to elicit compliance indirectly.

The Less-Is-Better Effect

• A paradoxical phenomenon where individuals prefer a smaller quantity of a desirable item over a larger quantity, often due to perceived quality.
• Demonstrates complexities in consumer behavior and decision-making preferences.

Cognitive Biases and Theories

• Prospect Theory: Describes how people make decisions in uncertain conditions, emphasizing loss aversion where losses weigh heavier than gains.
• The Intelligence Paradox: Highlights that higher intelligence does not always lead to better decision-making, particularly under emotional influence.
• Availability Heuristics: A mental shortcut that relies on immediate examples that come to mind, which can skew perceptions of probability and frequency.
• Attentional Bias: Refers to the tendency to focus on certain stimuli while ignoring others, often influenced by emotional states or previous experiences.

Psychological Effects

• Illusory Truth Effect: States that repeated exposure to a statement increases the likelihood of it being perceived as true, regardless of actual accuracy.
• Mere-Exposure Effect: Suggests that people tend to develop a preference for things merely because they are familiar with them.
• Mood Congruent Bias: Involves the tendency to remember information that aligns with one's current mood, which can distort judgments and perceptions.

Phenomena and Cognitive Patterns

• Baader-Meinhof Phenomenon: The experience of suddenly noticing something more often after being exposed to it for the first time, leading to a perception of increased frequency.
• Empathy Gap: Describes the inability to accurately predict emotional responses in oneself or others in different circumstances.
• Omission Bias: Tendency to judge harmful actions (active choices) as worse than equally harmful omissions (failures to act).

Memory and Perception Effects

• Von Restorff Effect: Highlights that an item that stands out is more likely to be remembered than other items that are similar.
• Focusing Effect: Describes the overemphasis on a particular feature while underestimating the impact of other factors in decision-making.
• Framing Effect: Explains how presenting information in different formats can dramatically influence perception and decision-making.

Psychological Laws and Biases

• Weber-Fechner Law: Relates to the perception of change in a stimulus, where the perceived change is proportional to the logarithm of the actual change.
• Confirmation Bias: Involves favoring information that confirms one’s preexisting beliefs, leading to misinterpretation of evidence.

Decision-Making Fallacies

• Semmelweis Reflex: Describes the tendency to reject new evidence that contradicts established norms or theories.
• Bias Blind Spot: The inability to recognize one's own cognitive biases while being able to identify biases in others.
• Clustering Illusion: The perception of patterns in random data, leading to misconceptions about relationships.

Realism and Gambling Biases

• Naive Realism: Belief that one perceives the world objectively, while others are biased or misled.
• Gambler's Fallacy: Incorrect belief that future probabilities are altered by past events in a random sequence.
• Hot-Hand Fallacy: The belief that a person who has been successful in a random event has a greater chance of further success.

Social and Cognitive Biases

• Bandwagon Effect: The tendency to adopt behaviors or beliefs because others are doing so, reinforcing social conformity.
• Zero-Sum Bias: A tendency to perceive a situation as a zero-sum game, where one party's gain is exactly balanced by losses from another party.

Retrospective and Predictive Biases

• Hindsight Bias: The inclination to see events as having been predictable after they have already occurred, leading to overconfidence in one's ability to foresee outcomes.
• Outcome Bias: Evaluating a decision based on its outcome rather than the quality of the decision at the time it was made.

Cognitive Overestimations and Fallacies

• Restraint Bias: Underestimating one's ability to control impulses, leading to poor decision-making.
• Overconfidence Effect: The tendency to overestimate knowledge or predictive capabilities, often resulting in taking undue risks.
• Dunning-Kruger Effect: Cognitive bias where individuals with low ability at a task overestimate their ability.

Economic and Decision-Making Biases

• Peltzman Effect: Describes how people may take greater risks if they perceive safety measures are in place.
• Hyperbolic Discounting: Preference for smaller, immediate rewards over larger, delayed rewards, leading to inconsistent decision-making over time.
• Sunk Cost Fallacy: The inclination to continue an endeavor once an investment in money, effort, or time has been made, leading to irrational decision-making.

Additional Biasing Effects

• Irrational Escalation: Continuing a course of action despite negative outcomes due to prior commitments.
• Zero Risk Bias: Preference for reducing risk to zero, even if it means forgoing larger potential benefits.
• Disposition Effect: Tendency to sell assets that have increased in value while keeping assets that have dropped in value, driven by loss aversion.
• Pseudo-certainty Effect: Preference for a certain outcome over a probabilistic one, even when the latter has higher expected value.

Behavioral Insights

• Backfire Effect: When individuals encounter contradictory evidence, they strengthen their original beliefs instead of changing their minds.
• Reverse Psychology: Influencing someone to do something by suggesting the opposite, leveraging reactance theory.
• Less-Is-Better Effect: Individuals may perceive a smaller option as more valuable than a larger one when the smaller option is presented as unique or exclusive.