Decision Heuristics and Biases

Question 1

Heuristic?

Answer 1

• a decision “rule of thumb” or shortcut

Question 2

Bias?

Answer 2

• use of a heuristic leads to a suboptimal decision

Question 3

Heuristics & biases are most common in

consumer decisions when?

Answer 3

1. Consumers are under time pressure

2. The choice components are ambiguous

Question 4

Common Decision Heuristics

Answer 4

• Compromise Effect
• Confirmatory Bias
• Sunk Cost Effect
• Case vs. Base Rate
  Effects
• Brand Name Effect
• Decoy Effect
• Family Influence
• Illusion of Control
• False Consensus Effect
• Halo Effect
• Price-Quality Heuristic
• Experimenter Bias

Question 5

Compromise Effect?

Answer 5

The tendency to avoid
extreme responses or
choices

Question 6

Confirmatory Bias?

Answer 6

The tendency to “see what you expect to see.”
People will interpret information in a way that
supports (or confirms) their prior expectations

Question 7

Halo Effect?

Answer 7

• The tendency to assume that if
  something is good on one attribute
  then it is good on all others.

Question 8

Sunk Cost Effect?

Answer 8

• The reluctance to reverse decisions that
  have led to negative outcomes when
  resources have already been “sunk” on
  that decision

Question 9

Case vs. Base Rate Effect?

Answer 9

People tend to be more persuaded by cases
than by base rates (even though base rates
are more accurate indicators of reality) (Lotto)

Question 10

Brand Name Effect

Answer 10

The reluctance to choose an unknown

brand

Question 11

Family Influence Effect

Answer 11

• The tendency to buy the same products that
  your parents bought
• aka “the intergenerational effect”
• Three basic reasons that drive product
  category. ..
• Car (ideological, symbolic)
• Ketchup (taste)
• Laundry Detergent (expertise)

Question 12

Illusion of Control?

Answer 12

• Need for control
• People feel better
  about situations in
  which they feel that
  they have some degree
  of control even if it is
  illusory.

Question 13

False Consensus Effect?

Answer 13

- The tendency to overestimate how
many people agree with you
q Biased sampling
q Salience of own reasons
q Ego needs

Question 14

Price-Quality Heuristic?

Answer 14

• People assume that higher priced goods are

higher quality

Question 15

Experimenter Bias

Social Desirability Bias

Answer 15

Subtle cues from a person asking a question

influence the person answering the question.