Chapter 9

Question 1

Heuristic

Answer 1

Cognitive short cut or ‘rule of thumb’, allowing for quick decision-making and judgement

Question 2

Cognitive bias

Answer 2

A particular situation in which mental heuristics introduce a predictable distortion into our assessment of a situation, resulting in a flawed judgement

Question 3

Affect heuristic

Answer 3

A tendency to use the strength of positive or negative emotional reactions as a decision-making short cut

Question 4

Availability heuristic

Answer 4

A tendency to be disproportionately influenced by whatever most easily or vividly comes to mind when making a decision or assessing options

Question 5

Recency bias

Answer 5

A tendency to over-estimate the significance of more recent things, because they come more easily and vividly to mind

Question 6

Anchoring effect

Answer 6

The ability of a starting value or frame of reference to influence your subsequent judgements, even when it has no relevance to what you’re considering

Question 7

Focusing effect

Answer 7

The tendency to focus excessively on one striking aspect of something, thus failing to give full consideration to a full range of other relevant factors

Question 8

Representativeness heuristic

Answer 8

The tendency to be influenced by the plausibility of a story or characterization, at the expense of underlying questions of its probability

Question 9

Stereotype

Answer 9

A commonly held, simplified and idealized view of the typical characteristics of something or someone of a particular type

Question 10

Social biases

Answer 10

A general term for instances of bias in our judgments

about other people, groups of people, or social and cultural institutions

Question 11

Framing effects

Answer 11

The way in which presenting the same scenario in different ways can affect judgement and alter preference, based on perceptions of loss and gain, positive and negative

Question 12

Re-framing

Answer 12

Deliberately selecting a different way of presenting information in order to challenge the emphasis created by a particular initial framing

Question 13

Loss aversion

Answer 13

The observation that losses are more painful than equivalent gains, and that people thus tend to be biased towards loss avoidance when making decisions

Question 14

Prospect theory

Answer 14

An observation-based theory describing how people choose between different degrees of known risk, and between different potential losses or gains

Question 15

Confirmation bias

Answer 15

The tendency to pay attention only to things that confirm our pre-existing ideas, and to ignore or seek to explain away evidence that contradicts them

Question 16

The sharpshooter fallacy/clustering illusion

Answer 16

The tendency to see a pattern where none exists, by imposing it after the event on evidence while ignoring whatever doesn’t fit

Question 17

Just world hypothesis

Answer 17

The belief that everything balances out in the end and that the world is fundamentally arranged in a way that is fair

Question 18

Coherence effect

Answer 18

The tendency to judge information not by its accuracy or likelihood, but by how internally coherent a story or a worldview it embodies

Question 19

Sunk cost fallacy

Answer 19

The tendency to continue expending energy on something you are emotionally invested in beyond the point at which it makes sense to abandon it

Question 20

Dunning–Kruger effect

Answer 20

The tendency of people with little or no ability in

an area to greatly over-estimate their ability, resulting in ignorance breeding unwarranted confidence

Question 21

Overconfidence effect

Answer 21

The strong tendency for most people – and especially experts outside their domain of expertise – to have excessive faith in their judgements and abilities

Question 22

Behavioural Economics

Answer 22

The application of psychological insights and methods to economics, exploring through experiment and observation the real- life decisions people make