Heuristics & Bias

Theory of Bound Rationality

limitations to the human mind

ex. throughly examining all cerals available in the US and choosing the best option

Satisficing

“good enough”

Availability heuristic

believing plane crashes are more common than car crashes bc it’s on the news more

Base-rate fallacy

individual stories > statistics

Representativeness heuristic

Associating a group with an attribute

ex: bank tellers

Intuition / lay belief

“gut feeling”

Price-Quality Intuition

more expensive the product —> better quality

Scarcity

ex: Supreme always shooting lower than demand so product is “rare”

Anchoring-and-adjustment

ex: car negociations

decoy-affect / asymmetric dominance

ex: choosing popcorn size at theater — “might as well”