Glossary of Behavioural Biases and Heuristics
Fields of behavioural science like Behavioural Economics have identified over 150 biases and heuristics (rules of thumb) people rely on to navigate the world. These biases shape how we behave and once understood can be used to make behaviour more effective.
Behavioural Economics: The study of cognitive social and emotional influences on economic decision-making.
Actor-Observer Bias (Fundamental Attribution Error): tendency to attribute own successes to character and the successes of others to the situation, while own failures are blamed on the situation and those of others, their character.
Adaption: tendency for the impact to wear off the more something is experienced.
Affect Heuristic: what we like determines our beliefs.
Ambiguity: We tend to avoid options where incomplete information makes the choice feel risky.
Anchoring: We base decisions on information that has been previously introduced even if it's irrelevant.
Attentional Bias: We tend to focus on only one or two choices even when there are several possible outcomes.
Authority: tendency to defer to someone who seems to be in authority.
Availability Bias: information that easily comes to mind tends to be over-weighted in its importance.
Availability Cascade: a simple idea gains popularity because of how simple it is, then seems even more simple because of how popular it is.
Backfire Bias: We reject evidence that contradicts our point of view even if we know it's true.
Bias Blind spots: we fail to see our own cognitive Biases.
Biases: Hard-wired decision-making tendencies. See also Heuristics.
Bounded Rationality: our rationality had limits
Center Stage Effect (a.k.a Goldilocks Effect): tendency to prefer the middle option.
Certainty (Zero risk) Bias: We are influenced more by smaller changes in probability that provide certainty than larger changes that do not. ie 99% to 100% better than 50% to 60%
Choice Architecture: structuring choices so optimal decisions can be made.
Choice Bracketing: tendency to focus on the impact of individual choices rather than the consequences of many choices taken together.
Choice Overload: More choices can result in less choosing. See also Paradox of Choice.
Choice Supportive Bias: We think positively about the choice once made even if it has flaws.
Clustering illusion: We tend to identify patterns where none are present.
Cognitive Dissonance: The tension we feel when our actions and beliefs are not consistent.
Commitment Devices: tools to lock us in to our intended behaviour.
Completion Bias (a.k.a. Endowed Progress): We are driven to complete tasks once we have started.
Confirmation Bias: We tend to seek information that confirms rather than contradicts our view.
Conjunction fallacy: We tend to believe the probability of two events happening is greater than one.
Conservatism Bias: Reliance on prior evidence rather than new information. Eg World is flat, Pantene
Contra Free Loading: tendency to pay for things we value and work for reasons other than money.
Curse of Knowledge: The more informed of us don't get why others cannot understand.
Decoupling: Tendency to separate the cost from the benefit over time.
Decision Quicksand: The tendency to seek additional information when an easy decision becomes unexpectedly difficult.
Decoy Effect: we can be persuaded to change our preferences between two choices when a third option is presented.
Default Bias (a.k.a. Status Quo Bias): tendency to want things to stay the same, selecting the default option where available.
Denominator Neglect: we focus on the number of times something has happened rather than the overall number of opportunities for it to happen.
Depletion Effect: The more decisions made in a day the more our capacity to make new ones is reduced. See also Ego Depletion.
Diagnosis Bias: We jump to an initial assessment from which it is difficult to change.
Disfluency: When information is difficult to process it interrupts processing fluency and increases perceived effort. See also Processing Fluency.
Disposition Effect: our tendency to sell shares whose price has increased, while keeping assets that have dropped in value to avoid being reminded of 'failure'.
Distinction Bias: We value two options differently when looking at them together rather than separately.
Diversification Bias: We overestimate the amount of variety we'll actually need in the future.
Drop in the Bucket Effect: tendency to not act if the impact of a personal contribution is not easily discerned.
Dual Process Theory: Conceptualisation of how we process information using two systems; eg conscious and unconscious, System 1 and System 2.
Duration Neglect: When the duration doesn't factor into the valuation.
Effort vs Reward: Conceptualisation of the two elements of behavioural influence; resources expended compared with the payoff. For behaviour to happen, R must exceed E.
Ego Depletion: tendency to make easy (default or impulsive) decisions once System 2 has been exhausted. See also Depletion Effect.
Empathy Gap: Our inability to understand people in a different emotional state to us.
Endowed Progress (a.k.a. Completion Bias): We are driven to complete tasks once we have started.
Endowment Effect (Ikea Effect): Value things we own more than things we don't and demand much more to give it up than others are willing to pay.
Focusing illusion: Whatever we are thinking about at that moment seems more important than at any other time.
Framing: tendency to draw different conclusions depending on how the data is presented.
Free: We act with disproportionate force when something is free. It can persuade us to change our behaviour.
Frequency illusion: Something you've just learned appears to be everywhere.
Goldilocks Effect (a.k.a.Center Stage Effect): tendency to prefer the middle option.
Halo Effect: We carry judgments about one characteristic over to another.
Hard-easy Bias: we tend to be over confident on easy problems and not confident enough for those that are hard.
Hedonic Framing: Two separate gains are more valuable than one large gain of equal value, whereas two separate losses are more painful than a single loss of equal value.
Herding (Bandwagon Effect): tendency to base actions and beliefs on what others are doing or believing. See also Social Norms.
Heuristics (Rules of Thumb): governing cultural, social or personal 'rules' we live our lives by. These mental short-cuts save mental energy but may be sub optimal. Eg Price=quality; house brands are cheaper
Hindsight Bias: We trick ourselves into believing we "knew it all along" rather than admit error.
Hyperbolic Discounting: 'Bird in the hand'. We tend to value a gain we receive now more than a larger gain available in the future. See also Short-term Bias.
Ideometer Effect: When an idea causes an unconscious physical reaction.
Illusion of control: we overestimate our ability to control events.
Illusion of validity: We tend to believe our predictions are valid despite contradictory evidence. Eg product breakdowns
Impact Bias (Affective Forecasting Error): We overestimate how happy or sad we will feel in the future about a gains or loss.
Information Avoidance: "head in the sand" avoidance of information that would result in a negative outcome.
Inter Group Bias: We view people in our own group differently than someone in another group.
Inter-temporal Choice (a.k.a. Short term Bias): we tend to focus on the immediate result of a decision over what the future may be.
Irrational Escalation: investing more in something based on the past even if we know its bad, throwing 'good money after bad'.
Judgment Heuristic: The methods we use to simplify our decision making and assessments of probability.
Just World Hypothesis: Our desire to believe that a higher power, karma, forces of justice or stability guide situations.
Less is More: perversely, with less knowledge we can often make more accurate predictions.
Loss Aversion: we prefer to avoid losses because they are 1.5-2.5 times as painful as gains are pleasurable.
Mary Poppins Principle: My description of Temptation Bundling, where you improve the likelihood of action by bundling a "want to do" with a "should do" (ie spoon full of sugar helps the medicine go down)
Mental accounting: tendency to think of the world in terms of specific accounts where value in one account is different to other.
Mood Heuristic: our mood affects ratings and judgments.
Narrative Fallacy: the way we have constructed our story of the past leads to imperfect decisions in the future.
Negativity Bias: We place more emphasis on negative experiences than positive.
Not Invented Here Bias: tendency to dismiss the ideas of others.
Observer-Expectancy Effect: Our expectations influence how we perceive an outcome.
Omission Bias: We tend to judge harmful actions as worse than equally harmful inactions.
Outcome Bias: We judge a decision on the outcome rather than the quality of the decision, ignoring the role luck plays.
Over Optimism: Tendency to think the world is better than it is, leaving us unprepared for danger and vulnerable to violence.
Over Confidence: We are too confident in our abilities which causes risk taking in every day lives.
Paradox of Choice: We like the freedom to choose but can get overwhelmed by it. See also Choice Overload.
Pessimism: Tendency to overweigh negative consequences.
Placebo Effect: Self-fulfilling prophecy where own beliefs cause something to happen.
Planning Fallacy: tendency to underestimate the length of time something will take, overestimate benefits and underestimate costs.
Possibility Effect: tendency to overweight the importance of highly unlikely events.
Pre Decisional Distortion: tendency to 'imprint' on brand initially favoured due to specific attribute and then sequentially judge other brands relative to that lead brand. Eg home security
Priming: our acts are often influenced by sub-conscious cues
Procedural Fairness: We tend to accept an outcome if we believe the process has been fair.
Processing Fluency: The ease with which information is understood can impact behaviour. See also Disfluency.
Prospect Theory: We make judgments relative to reference points and losses are more influential than gains.
Recency: We weight latest information more heavily than older information.
Reciprocity: Fairness should trump other values even if it's not in the interests of the economy or other parties.
Regression to the Mean: tendency for aggregate behaviour to be drawn close to the average and to take credit for rebalancing.
Relativity: everything is judged relative to something else and we prefer to use obvious rather than difficult points of comparison.
Remembering vs Experiencing self: we are persuaded by not only the experience but our memory of it.
Representativeness (Belief Bias): We assume things with some similarities are more similar than they really are.
Restraint Bias: We overestimate our ability to show restraint in the face of temptation.
Revenge: We will act to punish another due to perceived wrongdoing.
Salience: We focus on easily recognisable or memorable features of a person or concept.
Scarcity: tendency to value something more if it is rare.
Seer Sucker Illusion: we rely too heavily on expert advice, avoiding responsibility.
Selective Perception: We allow our expectations to influence how we perceive the world.
Self-Enhancing Transmission Bias: We share our successes more than our failures, creating a false perception of reality and an inability to accurately assess situations.
Self-Herding: tendency to follow decisions we have taken before.
Short-Term Bias (a.k.a. Present Bias, Inter-Temporal Bias): Preference for immediate gratification and to defer bad news till later. See also Hyperbolic Discounting.
Social Norms: tendency to follow what others do, the 'normal; behaviour in a situation. See also Herding.
Status Quo Bias (a.k.a. Default Bias): tendency to want things to stay the same, selecting the default option where available.
Stereotyping: we expect a group of people to have certain qualities without having any real information about the individuals.
Sunk cost fallacy: tendency to maintain possession of a position or item because of the resources already put in rather than give it up.
Survivorship Bias: Our focus is on examples of things that have survived.
System 1: Fast, intuitive, automatic, habitual, instinctive thinking. Vast capacity 11,000,000 bits/second.
System 2: Slow, rational, logic and fact driven thinking. Limited capacity 40-50 bits/second.
Temptation Bundling (a.k.a. Mary Poppins Principle): Improving the likelihood of action by bundling a "want to do" with a 'should do"
Tragedy of Commons: we overuse common resources because it is not in our individual interest to conserve them.
Transaction Utility: we are predisposed to pay more for something that we visualise in an expensive setting.
Uniqueness: we prefer to think we are unique, and will react against forces that compromise our sense of individuality.
Unit Bias: The belief that there is a universally agreed optimal unit size.
Up/Down congruence: Matching value representations to the head (up) and heart (down).
Visual Depiction Effect: tendency to be persuaded by images oriented for use.
Vividness: tendency to respond to something that stands-out.
Learn how to apply these biases to your business to get better results.
This glossary is contained in my book Behavioural Economics for Business. More info here.
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