Decision-making, belief and behavioral biases
- crowd rank
The ambiguity effect is a cognitive bias where decision making is affected by a lack of information, or "ambiguity". The effect implies that people tend to select options for which the probability of a favorable outcome is known, over an option for which the probability of a favorable outcome is unknown. The effect was first described by Daniel Ellsberg in 1961.
Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.
Several types of cognitive bias occur due to an attentional bias. One example is when a person does not examine all possible outcomes when making a judgment about a correlation or association. They may focus on one or two possibilities, while ignoring the rest.
The availability heuristic is a mental shortcut that uses the ease with which examples come to mind to make judgments about the probability of events. The availability heuristic operates on the notion that "if you can think of it, it must be important." The availability of consequences associated with an action is positively related to perceptions of the magnitude of the consequences of that action. In other words, the easier it is to recall the consequences of something, the bigger we perceive these consequences to be. Sometimes, this heuristic is beneficial, but the frequency that events come to mind are usually not accurate reflections of their actual probability in reality. For example, if someone asked you whether your college had more students from Colorado or more from California, under the availability heuristic, you would probably answer the question based on the relative availability of examples of Colorado student and California students. If you recall more students that come from California that you know, the more likely you will conclude that more students are from California.
An availability cascade is a self-reinforcing cycle that explains the development of certain kinds of collective beliefs. A novel idea or insight, usually one that seems to explain a complex process in a simple or straightforward manner, gains rapid currency in the popular discourse by its very simplicity and by its apparent insightfulness. Its rising popularity triggers a chain reaction within the social network: individuals adopt the new insight because other people within the network have adopted it, and on its face it seems plausible. The reason for this increased use and popularity of the new idea involves both the availability of the previously obscure term or idea, and the need of individuals using the term or idea to appear to be current with the stated beliefs and ideas of others, regardless of whether they in fact fully believe in the idea that they are expressing. Their need for social acceptance, and the apparent sophistication of the new insight, overwhelm their critical thinking.