Question

Label each of the following behaviors with the correct bias or heuristic. a. Your uncle says that he knew all along that the stock market was going to crash in 2008 . b. When Fred does well at work, he credits his intelligence. When anything goes wrong, he blames his secretary. c. Ellen thinks that being struck dead by lightning is much more likely than dying from an accidental fall at home. d. The sales of a TV that is priced at \(999\)dollars rise after another very similar TV priced at \(1,300\)dollars is placed next to it at the store. e. The sales of a brand of toothpaste rise after new TV commercials announce that the brand "is preferred by 4 out of 5 dentists."

Short answer

a. Hindsight Bias b. Self-serving Bias c. Availability Heuristic d. Anchoring Effect e. Social Proof

Step-by-step solution

Identify the Bias in Statement a

In statement a, where your uncle claims he knew all along that the stock market was going to crash in 2008, the bias present is the 'Hindsight Bias'. This is where individuals believe, in retrospect, that an event was predictable despite there having been little or no objective basis for predicting it.

Identify the Bias in Statement b

In statement b about Fred attributing success to his intelligence and failures to external factors (his secretary), the bias exhibited is the 'Self-serving Bias'. This is a tendency for individuals to attribute positive outcomes to their personal characteristics and negative outcomes to external circumstances.

Identify the Bias in Statement c

Statement c, where Ellen thinks being struck by lightning is more likely than dying from an accidental fall at home, refers to the 'Availability Heuristic'. This heuristic involves estimating the likelihood of an event based on how easily examples come to mind.

Identify the Bias in Statement d

In statement d, where the sales of a TV priced at $999 increase when placed next to a similar TV priced at $1,300, the bias is known as the 'Anchoring Effect'. The presence of a higher-priced item makes the $999 appear more economical, thus increasing sales.

Identify the Bias in Statement e

Statement e, regarding the rise in toothpaste sales after an advertisement claims it is preferred by 4 out of 5 dentists, demonstrates the bias of 'Social Proof'. This is where individuals assume that the actions of others in an attempt to reflect correct behavior for a given situation.

Key concepts

Hindsight Bias

Hindsight Bias is a fascinating psychological occurrence where people believe they "knew it all along" after an event has occurred. This is despite having little or no evidence before the event. It's a common human tendency to interpret past events as being more predictable than they actually were. For instance, after a football game, even those who initially doubted their team would win might now claim they were confident all along. This bias can affect decision-making and learning because it makes people overestimate their ability to predict events, leading to overconfidence. Understanding that past events were not as predictable as they seem can help mitigate this bias.

Self-serving Bias

Self-serving Bias is a type of bias where people attribute positive events to their own character but blame negative ones on external factors. For example, when students receive a good grade, they may credit their intelligence and hard work. However, if they get a poor grade, they might blame the exam's difficulty or a bad teacher. This bias can protect self-esteem, but it may also hinder personal growth and improvement. By being aware of this tendency, individuals can take a more balanced view of their successes and failures, recognizing both internal and external factors at play.

Availability Heuristic

The Availability Heuristic refers to the mental shortcut where people assess the probability of an event based on how easily they can recall examples of it. This can often lead to errors in judgment. For example, if someone frequently hears about airplane crashes on the news, they might overestimate the danger of flying, even though it's statistically very safe. This heuristic is useful for quick decision-making but can be misleading. Being aware that dramatic or memorable events tend to be more available in our minds can help in making more informed and rational decisions.

Anchoring Effect

The Anchoring Effect is a cognitive bias where an individual relies heavily on an initial piece of information, known as the 'anchor,' when making decisions. For instance, when a $999 TV is displayed next to a $1,300 TV, the $999 price seems like a bargain due to the comparative anchor of the higher price. This can affect consumer behavior, negotiations, and even judgments about others. By recognizing the potential impact of anchors, individuals can strive to base decisions on more than just the first piece of information they receive. Keeping the anchoring effect in mind can help in making more objective choices.

Social Proof

Social Proof is a psychological phenomenon where people look to the actions of others when determining their own. It's a way of making choices based on what is popular or what most people seem to be doing. For example, if a toothpaste brand claims that "4 out of 5 dentists recommend it," individuals might be more inclined to purchase that brand, assuming that it's the right choice. Social proof is especially influential in situations of uncertainty or where individuals feel they lack the information to make a decision. Recognizing when social proof is at play can help individuals make more independent choices and think critically about their decisions.