Band wagon effect
Conservatism bias (or estimation error)
Confirmation bias
The tendency to believe something just because many other
people believe the same.
The tendency to underestimate high values and overestimate
low ones. (e.g. “The Price is Right” phenomenon)
The tendency to selectively use other’s opinions to justify
one’s own choices/opinions.
Denomination effect
Endowment effect
Framing effect
The tendency to spend more money when it is denominated
in small amounts (e.g. coins) rather than large amounts (e.g.
bills). Note: this is why casinos use chips.
The tendency for people to demand much more to give up an
item they already own than they would be willing to pay for
it.
The effect on perception when the situation is presented or
described in different ways (contrast: a surgeon says either
that 5% of patients die or 95% of patients recover).
Money Illusion
Present bias (example of time inconsistency)
Information overload
The tendency to think of currency in nominal rather than real
terms (thus ignoring inflation and time value of money).
The tendency to have a stronger preference for immediate
reward rather than a later reward.
The tendency to seek information even when it cannot affect
action.
Loss aversion
Mental accounting
Sunk cost effect
The tendency to avoid losses much more than accepting equal
gains.
The tendency to group spending (or savings) into separate
categories.
The tendency to have a psychological investment in costs that
have already been incurred regardless of what the current
costs and benefits are.
Status quo effect
Reference dependent preference
Compromise effect
The tendency to stick with the default option (e.g. opt-in vs.
opt-out choice).
The tendency to judge one’s well-being relative to some
reference point (e.g. what other people have or are doing)
rather than in absolute terms.
The tendency to choose an option that represents a
compromise (e.g. buying the mid-priced appliance or TV).
Hindsight bias
Lake Wobegon effect (from Garrison Keiler)
False consensus effect
To filter memory of past events through present knowledge,
so that those events look more predictable than they actually
were (“I knew it all along”).
This phenomenon occurs when a supermajority of people
evaluate themselves as above average in ability (or other
desirable quality).
The tendency for people to overestimate the degree to which
others agree with them.
Anchoring
Availability bias
Gambler’s Fallacy
The tendency to rely too heavily on the first piece of
information offered even when it is irrelevant. (e.g. the first
price offered for a used car becomes the basis for the
negotiation)
The tendency to believe something is more likely based on
what is available in memory (bias toward vivid, unusual, or
emotionally charged examples).
The tendency to expect extreme performance to continue;
also ignoring averages (or probability) in favor of recent data.
(Thus, “hot” streaks are confused for the norm.)
Certainty effect (in risk situations)
Fairness (or Inequality) bias
Heuristics
The tendency to prefer a certain small reward rather than a
probable larger reward. (Even though the expected returns
are the same.)
The tendency to be averse to unfair outcomes and be willing
to forego a benefit (or incur a cost) in order to punish others
who are seen as unfair.
To make a decision using a rule of thumb, an educated guess,
an intuitive judgment, or common sense.