lecture 3 and class notes: heuristics and biases part 2 Flashcards
confirmation bias
We focus on kater information that confirm our initial expectations
ex: first impressions can create an expectation about you
gap in our perceptions
can be linked to framing –> bad first impressions have a much bigger effect down the road over good impressions . losses loom larger than gains
sunk cost bias
Tendency for people to escalate commitment to a course of action to which tehy have already made substantial commitments
we’ve spent time, effort and money
ationally, we should consider future marginal costs and benefits of actions going forward. Pasts costs arent usually recoverable . in practce, we consider past costs even if they cant be recovered and we lose sight of future marginal costs and benefits
overconfidence bias
More confident in our abilities than what we actually are
Wahts the reason for this bias? We are motivated to get the best for ourselves and this motivation biases our confidence in ourselves
Good sometimes bc it helps us undertake difficult projects bc we are confident and optimistic
But it increases our confidence more than it actually should
reducing biases
Knowledge: more you know about how the mind works and the biases, tyhje more we can adjust for them, and oibserve our own thinking and decision making
Need high motibvationa and high opportunity during decision making→ when low we use shortcuts. To avoid, have high motivation, important decision
Review: review our past decisions and note examples of bias
Feedback: get it from others about our decisions. We may use biases and heuristics so often so it seems normal and we fail to notice them. Its difficult to see our own flaws without a mirror. If you are working in a team, get feedback about your decisions from others.
confirmation bias in language
Ex of words scrambled together: we know the english language so we have an expectation of what’s coming
Should be called expectation confirmation bias
Anytime we have expectations of something, our mind looks to confirm it
When do people have expectations→ can be formed to learn a language
confirmation bias in perception
We expect to see art in a museum
Ex: students broke into a mueseum and installed a pineapple, people thought it was art for the first few weeks and did not remove it
confirmation bias in home evaluation
Outside appearance
Good to invest in the outside appearance of the house
We judge books by its cover according to confirmation bias
First impression is the most important impression
Ex: the mudroom. Usually looks bad but this is a mistake. Want the first room of the house to look nice
Interior rooms
Staging the home→ cost a lot of money but the anchoring will allow the price due to staging to increase
Availability heuristic→ want the buyer to visuaulize themselves in the home, if you have a home that has stuff on the walls that others dont like, this isnt a good idea, want to make the home as neutral as pissibke
Interior rooms
Bathroom should stand out
Want the buyers to remember something really good about the home, most rooms are the same, but if the bathroom is different than most other homes people will remember it
attributes and heuristics matter
less sunk cost on streaming platforms
For streaming shows/movies there is less sunk cost
People will stop watching the show bc there is no sunk cost→ issue for platforms bc they want people to watch the show. They have to make the first 10-15 mins really well made
Why do people spend lot of money on gambling despite low chances of winning
Availability heuristic: availability of large jackpot and past winner
Advertised heavily when its larger → availability heuristic
Availability: the winner. The winner is the one who gets talked about in the news, could motivate us, we remember the winner as opposed to the actual chances
Looking through the emotions lens: Anticipated positive emotions from winning (this si the focus, not loosing their money) , design of las vegas is to highlight your senses and to emphasise that what happens in vegas stays in vegas. People wont calculate the probability of losing their money
Anchoring: who cares if you spend 5$ if the payoff is 1 million dollars
More non rational judgment/ choice→ more concepts are working
Succeeding in a small business→ starting a restaurant, nightclub, etc, most new businesses don’t succeed and close after 5 years
Failures arent reported, good for economic system bc want to highlight your likelhod for success
overconfidence in driving
1) highways dont have signage, will put signage of what a crash looks like but may be distracting
Increase availability of negative consequences
2) Give them the facts, dont have a big impact tho
3) Laws→ can help but people dont remember the laws when they are in the car (no sticker saying the laws in your car)
4) Use emotions and availobity heirtsic with the right customers. Not with people who have already convimved themselves that they can drink and drive but with people learning to drive. We can influence their decisions to drink and drive. Bro mortys literally did this and im scarred
Get in the habit of doing something (everytime you drink call an uber no matter the amount)
Be especially careful about biases in judgment and decision-making when
You are in low effort citation MAO (low motivation/interest or low ability/knowledge or low opportunity/ time available)
Some heuristics are automatic and we cant avoid using them like anchoring , confirmation bias
Confirming bias in language perception
status quo bias
We have a general perfecne to stick with what we already have/ do
Stick to past choices . ex: sitting in the same spot every class
Status quo is a combo of anchoring and framing → if you make a change something wrong might happen
combo of framing and anchoring–> we rely on the anchor
The status quo is often framed as the “safe” option, while changes are framed as risky or involving potential loss. People prefer to avoid losses more than they enjoy equivalent gains (loss aversion), so they choose to stick with the current state because it feels less risky than potential changes
anchor acts as the current situation
fobo
Fear of missing option
Sometimes called fomo
Fear that the option we are currently considering buying may not be the best one out there
If you increase the more choices, people will postpone their choices. Bad for marketers because consumers may never buy
violen experiment
People have preconceived notions about where and when high-quality performances should occur. The setting of a subway station leads many to expect casual, low-quality entertainment rather than a top-tier artistic performance.
we also use shortcuts bc were in a rush
Confirmation bias: covid vaccine effectiveness
Belief based on data
Efficacy data
Country of origin of vaccine
Once people have doubts its a slippery slope ( fed by the media, they report bad news over goods news. If you have doubts over the vaccine, the media will confirm this)
Vaccine hesitation in population despite medical supoort for vaccination
Once you have hesitation, will come out and will feed the negative confirmation bias
How can governments address vaccine hesitancy
Option 1: People dont really process facts initially, they process emotions first
Option 2: trusted sources and positive stories, then facts . use a more vivid story like how vaccines saved my life
Personally relevant information (high effort processing of information)
Will make the decision more high effort
Visualize results such as antibody count in pictures (availability)
reasons for sunk cost
time, effort, money
reducing biases
knowledge: learn more about heuristics and biases
feedback: get feedback from others
review : with examples, availablity
apply the knowledge
establish good habits –> look for data, don’t use only examples (i.e., availability)
e.g., look for opposite points of view, not only same point of view (i.e.,
confirmation)
e.g., avoid reference points (i.e., anchoring on pricing/others’ opinion)
e.g., use a checklist
default option
goes with status quo
provided on apps because we just go with decisions that we have made in the past
reinforces the status quo bias
auto enrolment
minimizes the idea of loss–> we go with something we are used to
fobo jam study
Rationally consumers should take more choices
If you increase the more choices, people will postpone their choices. Bad for marketers because consumers may never buy
Number of choices have exploded now, more choices more fobo
