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Biases and Heuristics - Pearl

The document discusses various cognitive biases and heuristics including: 1. Anchoring bias, representative bias, availability heuristics, and framing effects can influence judgments and decisions in irrational ways. 2. Loss aversion, mental accounting, and intertemporal discounting can cause people to make poor financial choices by focusing on sunk costs or short-term gains over long-term benefits. 3. Stereotyping, self-serving bias, and other cognitive tendencies can lead to biased social judgments and decisions.

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Mohit Upadhyay
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172 views10 pages

Biases and Heuristics - Pearl

The document discusses various cognitive biases and heuristics including: 1. Anchoring bias, representative bias, availability heuristics, and framing effects can influence judgments and decisions in irrational ways. 2. Loss aversion, mental accounting, and intertemporal discounting can cause people to make poor financial choices by focusing on sunk costs or short-term gains over long-term benefits. 3. Stereotyping, self-serving bias, and other cognitive tendencies can lead to biased social judgments and decisions.

Uploaded by

Mohit Upadhyay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Biases and Heuristics

Pearl Malhotra
MPPO – 1-Oct-2018
Read only when you are asked. Go question by
question as requested by the instructor.
What’s happening?

• Anchoring bias
• Representative bias (similarity, randomness)/ Gambler’s fallacy (next time it’s going to be it)/
Regression fallacy (common cold)/ Conjunction fallacy (the Linda problem)/ Disjunction fallacy
(the biology student)
• Availability heuristics (the mental patient study)
• Framing Effect (Late fee vs. early registration)
Framing Treatment A Treatment B
"A 33% chance of saving all 600 people, 66% possibility of
Positive "Saves 200 lives"
saving no one."
"A 33% chance that no people will die, 66% probability that all
Negative "400 people will die"
600 will die."
What’s happening?

• Loss Aversion (teacher’s bonus/ endowment effect – seller vs. buyers estimation
etc./ poor choices) – extension of framing

• Mental Accounting (Sunk cost – e.g. Tennis lessons, Ski passes and bad weather,
yearly vs monthly gym membership & exercise, pennies a day strategy)

• Intertemporal discounting (cookies and chocolates, lottery shenanigans)

• Stereotyping (social biases)/ Self-serving bias/ Fundamental attribution error/


Choice overload
Self-interest Affective bias Group think

The Saliency bias Confirmation bias Availability bias


checklist
for
biases Anchoring bias Halo effect
Sunk-cost fallacy/
Endowment Effect

Over-confidence,
planning fallacy,
Disaster neglect Loss Aversion
optimistic biases &
competitor neglect
Informal fallacies in an argument
• Ad Hominem: irrelevant attack on arguer
suggesting that the argument is undermined by the
attack (e.g. TV-panels)

• Ad Verecundiam: appeal to authority; X is so


because Y said it! (Theophilus Painter and the case
of 24 chromosomes)

• Poisoning the well: pre-emptive attack on a person


in order to discredit their testimony or argument in
advance
System 1 vs System 2
• Involuntary/ intrinsic
• Cognitive bias
• Irrational behaviour (preferences for certain
$ BANK
coffee sizes, gasoline categories etc.) BANK
• Create a choice architecture
• Memorisation / categorisation
• Mental models

For example:
Context is complicated:

Visual cues, memories & associations


Goals, anxieties etc

System 1 – suppresses alternative theories when a


story has been formed
Cognitive bias mitigation
• Theory of decision points
• Rethink relational impact
• Rational analysis (obviously) Self
• External opinion
• Recognise patterns
• Nudges
• Pure incentives Others
• Reframing
Healthy food for kids (India, USA)

Arrows for direction (Pay & Save/ Metro stations)

Organ Donation (Austria)

Common Big Bin, little bin


Nudges Tax paying notices in UK

Paid to quit (Philippines)

Women in ads
Solve the garbage
problem in India

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