Decision-making Biases

  • Anchoring
  • Choice-supportive bias
  • Attentional Bias 
  • Normalcy bias
  • Outcome bias
  • Pseudocertainty effect
  • Irrational escalation
  • Denomination effect
  • Status quo bias
  • Loss aversion
  • Post-purchase rationalization
  • Endowment effect
  • Unit bias  

Probability Fallacies 

  • Gambler's fallacy
  • Frequency illusion
  • Base rate neglect
  • Conjunction fallacy
  • Subadditivity effect
  • Neglect of probability
  • Money illusion
  • Innumeracy
  • Contrast effect  
  • Zero-risk bias
  • Distinction bias
  • Well travelled road effect

Responses to Evidence

Decision-making biases

Anchoring 
Tendency to rely too heavily, or "anchor," on one salient trait or piece of information when making decisions    
  • Epley, N., & Gilovich, T. (2006). The anchoring and adjustment heuristic: Why the adjustments are insufficient. Psychological Science, 17, 311-318. 
  • Epley, N., & Gilovich, T. (2005). When effortful thinking influences judgmental anchoring: Differential effects of forewarning and incentives on self-generated and externally provided anchors. Journal of Behavioral Decision Making, 18, 199-212. 

Attentional Bias 
Tendency of emotionally salient stimuli in one's environment to preferentially draw and hold attention 

Choice-supportive bias   
Tendency to remember one's choices as better than they actually were    
Mather, M.; Shafir, E.; Johnson, M.K. (2000),"Misrememberance of options past: Source monitoring and choice". Psychological Science 11: 132-138    

Irrational escalation   
People justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong. See Sunk Cost Fallacy below.

Sunk Cost Fallacy
After putting money, energy and time into an investment, project, or a product that does not produce the expected outcome, or loses value, we tend to rationalize the use of our money as worthwhile.
Your Mind and Your Money: 
Sunk Cost Fallacy
Jan 25th, 2010 by Roger, the Amateur Financier.

Outcome Bias    
Tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.

Normalcy bias
Refusal to plan for, or react to, a disaster which has never happened before.

Pseudocertainty effect
Tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes
 Tversky, A., & Kahneman, D. (1986). Rational Choice and the Framing of Decisions. The Journal of Business, 59, S251-S278.

Denomination effect 
Tendency to spend more money when it is denominated in small amounts (e.g. coins) rather than large amounts (e.g. bills).
Why We Spend Coins Faster Than Bills by Chana Joffe-Walt. All Things Considered, 12 May 2009.

Distinction bias    
Tendency to view two options as more dissimilar when evaluating them simultaneously than when evaluating them separately.
  • Hsee, C.K. (1998). "Less is better: When low-value options are valued more highly than high-value options". Journal of Behavioral Decision Making 11 (2): 107–121. 
  • Hsee, C.K.; Leclerc, F. (1998). "Will products look more attractive when presented separately or together?". The Journal of Consumer Research 25 (2): 175–186. 
  • Hsee, C.K.; Zhang, J. (2004). "Distinction bias: Misprediction and mischoice due to joint evaluation". Journal of Personality and Social Psychology 86 (5): 680–695.

Focusing effect    
Tendency to place too much importance on one aspect of an event; causes error in accurately predicting the utility of a future outcome.
Kahneman, Daniel; Alan B. Krueger, David Schkade, Norbert Schwarz, Arthur A. Stone (2006-06-30), "Would you be happier if you were richer? A focusing illusion", Science 312 (5782): 1908–10

Status quo bias
Tendency to like things to stay relatively the same (see also loss aversion, endowment effect, and system justification). 
Samuelson, William; Richard Zeckhauser (1988). "Status Quo Bias in Decision Making". Journal of Risk and Uncertainty: 7–59.

Information bias    
Tendency to seek information even when it cannot affect action.

Endowment effect    
"People often demand much more to give up an object than they would be willing to pay to acquire it".
(Kahneman, Knetsch & Thaler 1991, p. 193) Richard Thaler coined the term "endowment effect."

Post-purchase rationalization
Tendency to use rational argument to convince oneself that a purchase was a good value.

Loss Aversion
"The disutility of giving up an object is greater than the utility associated with acquiring it". 
(see also Sunk cost effects and Endowment effect).
(Kahneman, Knetsch & Thaler 1991, p. 193) 
Daniel Kahneman and Amos Tversky coined the term "loss aversion."

Probability

Gambler's fallacy
Tendency to think that future probabilities are altered by past events, when in reality they are unchanged.  An erroneous conceptualization of the Law of large numbers. For example, "I've flipped heads with this coin five times consecutively, so the chance of tails coming out on the sixth flip is much greater than heads."

Frequency illusion

"The Baader-Meinhof 
phenomenon".
Illusion in which a word, a name or other thing that has recently come to one's attention suddenly appears "everywhere" with improbable frequency (see also recency illusion). 

Base rate neglect  
Tendency to base judgments on specifics, ignoring general statistical information

Illusory correlation   
Inaccurately perceiving a relationship between two events, either because of prejudice or selective processing of information

Conjunction fallacy

  
Tendency to assume that specific conditions are more probable than general ones.
Fisk, John E. (2004), "Conjunction fallacy", in Pohl, Rüdiger F.,Cognitive Illusions: A Handbook on Fallacies and Biases in Thinking, Judgement and Memory, Hove, UK: Psychology Press, pp. 23–42

Subadditivity effect
Tendency to judge probability of the whole to be less than the probabilities of the parts.

Contrast effect 
The enhancement or diminishing of a weight or other measurement when compared with a recently observed contrasting object.
Plous, Scott (1993), The Psychology of Judgment and Decision Making, New York: McGraw-Hill

Neglect of probability
Tendency to completely disregard probability when making a decision under uncertainty.

Innumeracy

 
Inability to reason intuitively with the greater orders of magnitude.

Money Illusion
Tendency to concentrate on the nominal (face value) of money rather than its value in terms of purchasing power. 
Shafir, Eldar; Diamond, Peter; Tversky, Amos (2000), "Money Illusion", Choices, values, and frames, Cambridge University Press, pp. 335–355

  

Well travelled road effect
Underestimation of the duration taken to traverse oft-traveled routes and over-estimate the duration taken to traverse less familiar routes.

Zero-risk bias
Preference for reducing a small risk to zero over a greater reduction in a larger risk.

Responses to Evidence

Confirmation bias    
The tendency to interpret data in a way that confirms our premises and opinions and ignore evidence that refutes them.    
Oswald, Margit E.; Grosjean, Stefan (2004), "Confirmation Bias", in Pohl, Rüdiger F., Cognitive Illusions: A Handbook on Fallacies and Biases in Thinking, Judgement and Memory, Hove, UK: Psychology Press, pp. 79–96  

Experimenter's or 
Expectation bias     
Tendency for experimenters to believe, certify, and publish data that agree with their expectations for the outcome of an experiment, and to disbelieve, discard, or downgrade the corresponding weightings for data that appear to conflict with those expectations.

Observer-expectancy effect
When a researcher expects a given result and therefore unconsciously manipulates an experiment or misinterprets data in order to find it 
benefits_of_observer_effects..pdf
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Congruence bias
Tendency to test hypotheses exclusively through direct testing, in contrast to tests of possible alternative hypotheses. Occurs due to people's overreliance on direct testing of a given hypothesis, and a neglect of indirect testing.

Backfire effect
Evidence disconfirming our beliefs only strengthens them.

Semmelweis reflex
Tendency to reject new evidence that contradicts a paradigm. Refers to resistance of obstetricians to wash their hands when delivering babies in spite of evidence collected by Dr. Semmelweis that the main cause of postpartum infections was due to bacteria transmitted from the hands of the doctors to mother during labor.
Edwards, W. (1968). Conservatism in human information processing. In: B. Kleinmutz (Ed.), Formal Representation of Human Judgment. (pp. 17-52). New York: John Wiley and Sons.

Forward bias
Tendency to create models based on past data which are validated only against that past data.

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