Mkt Biases

Anchoring Bias

Anchoring Bias

When people are over-reliant on the first piece of information they hear

Anchoring Bias Example

In a salary negotiation, whoever makes the first offer establishes a range of reasonable possibilities in each person’s mind

Availability Heuristic

People overestimate the importance of information that is available to them

Availability Heuristic Example

A person might argue that smoking is not unhealthy because they know someone who lived to 100 and smoked three packs per day

Confirmation Bias

We tend to listen only to information that confirms our preconceptions

Confirmation Bias Example

Only getting news from sources that agree with your political/social beliefs

Information Bias

The tendency to seek information when it does not affect action

More information is not always better

Information Bias News

Researching a phone and only paying attention to negative reviews and ignoring positive reviews

Ostrich Effect

The decision to ignore dangerous or negative information by “burying” one’s head in the sand

Ostrich Effect Example

Investors check the value of their holdings significantly less often during bad markets

Overconfidence

Some of us are too confident about our abilities, and this causes us to take greater risks in our daily lives

Overconfidence Example

IT experts don’t research computer models before buying because they think they already know everything about computer features

Recency

The tendency to weigh the latest information more heavily than older data

Recency Example

Shopping for a car and looking just at new features in new models and ignoring a history of poor quality in older models

Stereotyping

Expecting a person or group to have certain qualities without having real information about the person

Stereotyping Example

Shopping for athletic shoes and seeing a brand that is marketed primarily to professional athletes. Assuming that only serious athletes should wear this brand, you assume it is too advanced for your casual jogging needs.