Nobel prize-winner Herbert Simon argued that we can learn much about decision making by examining where we deviate from ideal decisions. We summarize a number of the most common decision biases below. Anchoring and adjustment bias occurs when individuals react to arbitrary or irrelevant numbers when setting financial or other numerical targets. rr A Availability bias occurs when more readily available information is incorrectly assessed to also be more likely. Escalation of commitment bias occurs when individuals continue on a failing course of action even after it becomes clear that this may be a poor path to follow. Self-serving bias occurs when good outcomes are attributed to personal characteristics (e.g., intelligence) but undesirable outcomes are attributed to external circumstances (e.g., the weather). Hindsight bias occurs when mistakes seem obvious after they have already occurred. Judgments about correlation and causality bias occurs when individuals make inaccurate attributions about the causes of events. 1. Misunderstandings about sampling bias occurs when individuals draw broad conclusions from small sets of observations instead of more reliable sources of information derived from large, randomly drawn samples. Overconfidence bias occurs when individuals are more confident in their abilities to predict an event than logic suggests is actually possible. Framing bias occurs when the way information is presented alters the decision an individual will make. Representativeness bias occurs when managers use stereotypes of similar occurrences when making judgments or decisions. Satisficing occurs when individuals settle for the first acceptable alternative instead of seeking the best possible (optimal) decision.
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