Cognitive bias is the tendency to acquire and process information by filtering it through one’s own likes, dislikes and experiences. The following are examples of cognitive biases.
• Framing effects: The way a problem is presented to the decision maker will affect his or her actions.
• Sunk cost fallacy: The tendency to continue to invest in something, even if it is a hopeless case.
• Status quo bias: People prefer that things remain the same, or that things change as little as possible if they must be altered.
• Endowment effect: People value a good or service more once their property right to it has been established.
• Loss aversion: People tend to strongly prefer avoiding losses to making gains. Studies suggest losses are twice as powerful psychologically as gains.
• Anchoring effect: The tendency to rely too heavily, or “anchor,” on a past reference or on one trait or piece of information when making decisions.
• Overconfidence effect: Excessive confidence in one’s own answers to questions. For example, for certain types of questions, answers people rate as “99 percent certain” turn out to be wrong 40 percent of the time.
• Survivorship bias: Concentrating on the people or things that “survived” some process and ignoring those that didn’t, or arguing that a strategy is effective given the winners, while ignoring a large number of losers.