Cognitive biases

I decided to write my first post about a very popular Psychology phenomena: Cognitive biases.

Cognitive biases are systematic patterns in which we deviate from rational thinking. When pressed to make a decision with limited information, we make use of heuristics -simple and efficient rules- to do so in a faster manner. We make use of these shortcuts because of cognitive limitations or motivational factors. Sometimes these processes don’t work as expected and lead us to errors. Those errors are the cognitive biases.

First identified by Daniel Kahneman and Amos Tversky in the early 70s [1], the concept has been widely reported and applied in the fields of Economics and Marketing. Nowadays, we can easily find multiple sources that list from 15 to over 250 different types of cognitive biases. In many cases, it is a matter of using different names to describe the same occurrence.

For now, I am going to start discussing cognitive biases that have been highly documented and that do not correlate with cognitive ability. These are the ones that we all succumb to and seem to be universally present.

Anchoring is a very popular type of decision-making bias. It occurs when the piece of information that first appears anchors the judgments and guesses that would come later. This effect has been substantially demonstrated in tasks involving numerical variables.

An example of this is the study in which subjects are asked to guess how many African countries belong to the UN. Before being asked this, an experimenter spins a wheel that would point to a number -15 in the first condition, 65 in the second. After this, the subjects in the first condition underestimated the number of African countries. The subjects in the second condition -the ones who saw the wheel point to number 65- overestimated the number. In case you were wondering, there are 54 African member states in the UN.

The Escalation of commitment bias is the tendency to continue to invest additional resources -including time and money- on a failing course of action. This pattern is explained by the importance we give to the sunk costs -what has already been spent and cannot be recovered.

I find very interesting that this type of irrational thinking has been observed universally and seems to be independent of cognitive ability. Apart from being observed in experimental studies, the building of the Concord and the continuation of the Vietnam War are also cited as examples of the effect of this type of bias.

I will also like to comment on some types of cognitive biases for which the empirical evidence is inconclusive. As I mentioned earlier, resources found online usually list many of these.

Loss aversion is the tendency to prefer to avoid losses than to obtain similar gains. The idea is that loss has a stronger psychological impact than gain. Most people would prefer not to lose €20 rather than to stumble upon a €20 bill.

Loss aversion has been questioned in the last years, as it seems that not everyone is affected by it. Also, the effect on people who are indeed affected seems to be smaller than first reported.

The probability neglect bias is defined as the tendency to disregard probability when making a decision. In particular, people seem to disregard probability when there is a very small risk of negative outcome. It seems that this cognitive bias is not universally present and correlates with cognitive ability.

We are still trying to correctly identify cognitive biases that operate as single entities [2]. There is also a lot to be said about their universality. [3] The study of human decision-making processes is a thriving one in Psychology, in part due to the immediate applications in more lucrative fields like Marketing. It is safe to say that we will see new developments in this topic in the upcoming 2017.



(This post was originally published on on December 28th, 2016)


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