Chapter 6 | Availability Bias Flashcards
Availability Bias other term
Availability Heuristic
Things on the news
I have all that I need
Things in the world
Availability Bias
In psychology it’s the human tendency to rely on information that comes readily to mind when evaluating situations or making decisions
Availability Bias
Because of this bias, people believe that the readily available info is more representative of fact than is the case
Availability Bias
The availability bias is a rule of thumb, or mental shortcut that allows people to estimate the probability of an outcome based on how prevalent or familiar that outcome appears in their lives.
Availability Bias
Tendency to rely on available info
Availability Bias
Overestimate or underestimate because of availability of info
Availability Bias
Several examples
Running away from fear of white van
Man abducted in gasoline station
Orphan
Things happening in the world, things on the news.
Fear of flying
Memories of past success
Lion Attacks
Pygmy Hippo
Categories of availability bias
Retrievability
Categorization
Narrow Range of Experience
Resonance
Ideas that are retrieved most easily seem to be the most CREDIBLE, though it’s not necessarily the case
Retrievability
Unang naaalala when it comes to investment
Retrievability
Also it refers to our tendency to make decisions based on memories that we can recall
Retrievability
Other examples
Martial Law, Axie, ABS CBN, Utang
Bias due to RETRIEVABILITY instances was developed by ______. When some events are more vivid than others or have occurred recently be recalled memory and thus appear more frequent. Leads to bad decision-making.
Retrievability
Attempt to categorize or summon information to that matches certain reference
Categorization
The first thing that their brain do is to generate set of search terms that will allow them to efficiently navigate their brain classification structure and locate data they need.
Categorization
Example is the pronounce and unsustainable market rise attributed to increase speculation in technology stocks
Tech bubble
When a person possess too restrictive frame or reference from which to formulate an OBJECTIVE ESTIMATE
Narrow Range of Experience
Investors will choose investments that fit their narrow range of life experiences such us industry they work for, the region they live in, and the people they associate with. For example, investors who work in technology industry may believe that only technology instruments will be profitable. (Example Kodak, Nokia, Kangkong Chips)
Narrow Range of Experience
The extent to which certain vis-a-vis given a situation can influence judgement
Resonance
Investors will choose investments that resonate with their own personality or that have characteristics
Resonance
Implication for Investors
Investors ignore potentially beneficial investments because information to those investments is not readily available information avoiding diligent research.
