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Cognitive Biases in Decision Making - Study Notes

Cognitive biases are systematic deviations from rational judgment that simplify information processing, including common types like confirmation bias and loss aversion. These biases can negatively impact decision-making in various fields such as finance and policy-making. Strategies to mitigate their effects include encouraging diverse viewpoints and utilizing decision-making frameworks.

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45 views1 page

Cognitive Biases in Decision Making - Study Notes

Cognitive biases are systematic deviations from rational judgment that simplify information processing, including common types like confirmation bias and loss aversion. These biases can negatively impact decision-making in various fields such as finance and policy-making. Strategies to mitigate their effects include encouraging diverse viewpoints and utilizing decision-making frameworks.

Uploaded by

ananyayogish
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Cognitive Biases in Decision Making – Study Notes

Definition:
Cognitive biases are systematic patterns of deviation from norm or rationality in
judgment. They often result from the brain’s attempt to simplify information
processing.

1. Common Biases:
 Confirmation Bias: Tendency to search for or interpret information that
confirms one’s preconceptions.
 Anchoring Bias: Relying too heavily on the first piece of information
encountered (the “anchor”) when making decisions.
 Availability Heuristic: Overestimating the importance of information
readily available in memory.
 Overconfidence Bias: When someone’s confidence in their judgments is
greater than their accuracy.
 Loss Aversion: Tendency to prefer avoiding losses over acquiring
equivalent gains.

2. Impacts on Decision-Making:
 Can lead to poor financial, social, or strategic decisions.
 Influences hiring, policy-making, risk assessment, etc.

3. Mitigation Strategies:
 Encourage diverse viewpoints and devil’s advocacy.
 Use decision-making frameworks (e.g., cost-benefit analysis).
 Practice mindfulness and critical thinking.

4. Applications:
 Psychology & behavioral economics
 Marketing & consumer behavior
 Business strategy & leadership
 Public policy & risk communication

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