Q8 Biases

Question 1

What is the meaning of “bias”?

Answer 1

A natural tendency, mostly beyond one’s control

Question 2

Cognitive biases

Answer 2

Mental tendencies that are often hidden or unrecognized, making it so they are particularly powerful

Question 3

The 4 types of cognitive biases

Answer 3

• Anchoring bias
• Availability heuristic
• Price bias
• Relativity trap

Question 3

When do general tendencies surface and why?

Answer 3

When we have insufficient information, as we are often unaware this deficit is affecting our numerical judgment

Question 5

Anchoring bias

Answer 5

Reliance on the first number or piece of information offered when faced with inadequate information

Question 6

Do you think there are more or less than 20 countries in Africa?
OR
Do you think there are more or less than 40 counties in Africa?

Answer 6

Offering either 20 or 40 changes the guess, serving as a mental anchor

Question 7

Group 1 was told to guess the answer to the equation:
1 x 2 x 3 x 4 x 5 x 6 x 7 x 8
Group 2 got this equation:
8 x 7 x 6 x 5 x 4 x 3 x 2 x 1

The median guess of Group 1 was 512
The median guess of Group 2 was 2,250

Answer 7

Even though the equations’ answer is the same and has the same numbers as each other, starting with the larger number changed the guess

Question 8

Coach A starts with a low record, and slowly progresses
Coach B starts with a high record, and jumps between high and low records

Why do most people choose Coach A?

Answer 8

• Starting with a low number lowers expectation
• Coach B started with a higher number, which anchored expectations to be higher

Question 9

Availability heuristic

Answer 9

Extrapolating from top-of-mind examples when faced with inadequate info

Question 10

Heuristic

Answer 10

Mental rule of thumb obtained through self-learning

Question 11

Availability

Answer 11

Refers to drawing quickly from memory or experience

Question 12

Think of the difference between the two questions:

How many six-letter words have the form _ _ _ _ n _?

How many six-letter words have the form _ _ _ i n g?

Answer 12

• Second question is easier to come up with at the top of our heads
• Even though both questions could have the same answer
• First question could have more answers

Question 13

Which is more common in the USA: homicide or suicide?

Answer 13

• Most would say homicide because we see it all the time on the news and in movies
• We rarely hear about suicide because it’s seen as a private matter
• True answer is suicide
• Availability heuristic skews our estimation

Question 14

Instagram envy

Answer 14

Availability heuristic makes us think everyone else had a better summer/trip because those posts are what readily comes to mind

Question 15

An experiment gave participants a “pain relieving” pill after administering electric shocks, without knowing it was a placebo. The ones who thought the pill was $2.50 said it worked great, but the ones who thought it was 10 cents said it worked poorly.

Answer 15

• $2.50 is expensive, so for the price, it is expected to work
• 10 cents is cheap, so it lowers to expectation for product effectiveness

Question 16

Price bias

Answer 16

Allows price to determine perceptions of effectiveness or quality when faced with inadequate information

Question 17

A new Apple phone costs about $700
A competitor offers a $300 phone

Answer 17

You would rightfully question its quality

Question 18

When is price bias at its most significant?

Answer 18

When we lack enough information to make an informed choice, we essentially let price decide

Question 19

Relativity trip

Answer 19

Assigns greater weight to numbers based on their relative size when faced with inadequate info

Question 20

You want to buy a new laptop from your usual store for $1000. Your friend says if you travel 1 extra mile to a different store you can get it $10 off. Why do most people choose not to travel the extra mile?

Answer 20

Getting $10 off a laptop is relatively small, it’s just 1%

Question 21

You want to buy a 6-pack of Gatorade from your usual grocery store. Your friend says if you travel 1 extra mile to a different store you can get it BOGO. Why do most people choose to go to the different store?

Answer 21

Getting $10 off Gatorade is a large saving, it’s 50%

Question 22

Three magazine subscriptions are offered:
Online-only: $59
Print-only: $125
Print and online: $125

What do most people choose?

Answer 22

• Most people know the second one is a bad deal
• It was offered so more people choose the print and online subscription
• If they got rid of the bad deal, most people would just get the cheaper option

Question 23

Starbucks only offered 3 sizes. If Venti is the best deal with the lower price per ounce, why don’t people get it?

Answer 23

• Some people think its too much for them to drink
• Grande is the most popular because its in the middle and Americans prefer perceived moderation

Question 24

Starbucks added a Trenta size. What does this do?

Answer 24

It skews the “middle option” to be Venti, causing more people to buy the more expensive drink size

Question 25

Difference between relativity trap and price bias

Answer 25

• Relativity trap assigns weight to numbers based on their relative position
• Price bias uses price as a substitute for quality or effectiveness

Question 26

Why do Silver Olympic medalists feel more disappointed than Bronze?

Answer 26

• Silver thinks they could’ve been a LITTLE better and gotten Gold and 1st place
• Bronze is happy that they didn’t get fourth place and no medal