Decision Making - Individuals

Lets take a look at some of biases that influence our decisions

Taking right decision without subject biases is very important in day to day life. There is no magic formula to save us from the following but being aware of them goes a long way in helping us take good decisions. Here is a list of biases that can come in the way of taking good decisions.

• The Overconfidance affect is a well-established bias in which a person’s subjective confidence in his or her judgments is reliably greater than the objective accuracy of those judgments, especially when confidence is relatively high

• The Sunk cost effect is the tendency for humans to continue investing in something that clearly isn’t working. Because it is human nature to want to avoid failure, people will often continue spending time, effort or money to try and fix what isn’t working instead of cutting their losses and moving on.

• Recency Effect is the phenomenon of a person most easily remembering something that has happened recently, compared to remembering something that may have occurred a while back.

• Confirmation bias, also called confirmatory bias or myside bias, is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.

• Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments.

• Illusaory Corelation is the phenomenon of perceiving a relationship between variables (typically people, events, or behaviors) even when no such relationship exists.

• Hindsight Bias, also known as the knew-it-all-along effect or creeping determinism, is the inclination, after an event has occurred, to see the event as having been predictable, despite there having been little or no objective basis for predicting it.

• Egocentric Bias is the tendency to rely too heavily on one’s own perspective and/or have a higher opinion of oneself than reality.