Question

Describe kahneman and tversky's research. Then describe the 4 biases that we use to make decisions. Give an example of each.

Answer 1

Answer. In 1970, kanheman and Tversky introduced concept of psychological bias. Their research was published in their book, "Judgment Under Uncertainty." According to them psychological bias also called cognitive bias can be defined as the tendency of an individual to make decisions or take action in a illogical way.For instance,you may subconsciously use data selectively, or you may feel pressured to make a decision by some powerful colleagues.
Psychological bias is not the same as common sense and clear judgment. It can lead to missed opportunities and poor decision making.

There are four main types of biases that we use to make decisions :-

1. Confirmation bias- it is when we look at things and interpret them in the way we want to . We Look for data and information that confirms to our existing beliefs.

2. Overconfidence bias : it is when we become too much confident about our opinion and decision. We think our opinion is the best and the most needed in making the decision. E.g. “ I know what I am thinking is correct so please follow my lead”.

3. Fundamental attribution error: it is when we blame others for whatever wrong happens. If a decision taken by you fails to execute properly , you may put the blame on others for this.

4. Gambler’s fallacy: it is when you expect past events and experiences to influence current decision. For e.g. tossing a coin seven times gives you heads , you are more likely to believe that when you toss the coin for the 8th time , again heads will come.