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Heuristics in Judgment and Decision-Making

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Heuristics in judgment and decision-making. In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions.

Heuristics in judgment and decision-making

They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others.[1][2][3] These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called "cognitive biases" and many different types have been documented. These have been shown to affect people's choices in situations like valuing a house, deciding the outcome of a legal case, or making an investment decision.

Heuristics usually govern automatic, intuitive judgments but can also be used as deliberate mental strategies when working from limited information. This "Heuristic-and-Bias" tradition has been criticised for being too focused on how heuristics lead to errors.[8] However, heuristics can be seen as rational in an underlying sense. Types[edit] Availability[edit] [edit] 5 Common Mental Errors That Sway Your Decision Making. I like to think of myself as a rational person, but I’m not one.

5 Common Mental Errors That Sway Your Decision Making

The good news is it’s not just me — or you. We are all irrational. For a long time, researchers and economists believed that humans made logical, well-considered decisions. In recent decades, however, researchers have uncovered a wide range of mental errors that derail our thinking. Sometimes we make logical decisions, but there are many times when we make emotional, irrational, and confusing choices.

Psychologists and behavioral researchers love to geek out about these different mental mistakes. Here are five common mental errors that sway you from making good decisions. 1. Nearly every popular online media outlet is filled with survivorship bias these days. Survivorship bias refers to our tendency to focus on the winners in a particular area and try to learn from them while completely forgetting about the losers who are employing the same strategy. 2. 3.

Anchoring Effect: How The Mind is Biased by First Impressions. The anchoring effect illuminates how we negotiate, predict our emotions, agree a price and much more… To illustrate the anchoring effect, let’s say I ask you how old Mahatma Gandhi was when he died.

Anchoring Effect: How The Mind is Biased by First Impressions

For half of you I’ll preface the question by saying: “Did he die before or after the age of 9?” For the other half I’ll say: “Did he die before or after the age of 140?” Obviously these are not very helpful statements. Anyone who has any clue who Gandhi was will know that he was definitely older than 9; while the oldest person who ever lived was 122. Because, according to the results of a study conducted by Strack and Mussweiler (1999), these initial statements, despite being unhelpful, affect the estimates people make.

In their experiment, the first group guessed an average age of 50 and the second, 67. Neither was that close, he was actually assassinated at 87; but you can still see the effect of the initial number. The anchoring effect You can see the same effect in salary negotiations. Cognitive Biases: Why We Make Irrational Decisions. Explore some classic biases in everyday thinking—and how to avoid them.

Cognitive Biases: Why We Make Irrational Decisions

Over the decades psychologists have discovered all kinds of biases in how we think. Some tell us why the incompetent don’t know they’re incompetent, others why it’s difficult to estimate our future emotions and some why we feel more transparent to others than we really appear. Many of these biases result from our minds using little short-cuts to help us navigate through a complicated world.

Unfortunately the result can be that we reach irrational decisions. Understanding how these biases operate may help you make better decisions in all sorts of situations, both at home and work. Image credit: David Goehring. The Endowment Effect. A strange thing happens in the mind when you buy something.

The Endowment Effect

No matter what it is—a pair of jeans, a car or even a house—in that moment when an object becomes your property, it undergoes a transformation. Because you chose it and you associate it with yourself, its value is immediately increased (Morewedge et al., 2009). If someone offers to buy it from you, the chances are you want to charge much more than they are prepared to pay. That is a cognitive bias called ‘the endowment effect’. It’s the reason that some people have lofts, garages and storage spaces full of junk with which they cannot bear to be parted.

When tested experimentally the endowment effect can be surprisingly strong. The endowment effect is particularly strong for things that are very personal and easy to associate with the self, like a piece of jewellery from your partner. Sometimes, of course, the sentimental value of things is justified; but more often than not people hold on to old possessions for no good reason.