What are cognitive biases?
A cognitive bias is a systematic pattern of deviation in judgment. Individuals create their own “subjective reality” from their perception of the input. An individual’s construction of reality, not the objective input, may dictate their behavior in the world. Cognitive biases, however sometimes useful, may sometimes lead to perceptual distortion, inaccurate judgment, illogical interpretation, or what is broadly called irrationality or just fun!
Now with that out of the way, I would like to share some fun biases I’ve discovered. Who said psychology needs to be dull? Let’s go!
Denomination effect: The tendency to spend more money when it is denominated in small amounts (e.g., coins) rather than large amounts (e.g., bills).
We all know that one, that is the reason your coffee is priced 3.99 instead of 4. On the other hand some people would put coins in a jar and just use the bills? Do know that use? I’ve heard that one but I don’t see any logic in it so I must be influenced by the denomination effect for sure.
Disposition effect: The tendency to sell an asset that has accumulated in value and resist selling an asset that has declined in value.
That one seems logic to me, but clearly it isn’t. I would regret the fact that I put so much money in a product and of course I would love to see the value rise back again when I decide to sell it at least. I guess that is why some people hold on to old things because one day they will be worth more.
Frequency illusion or Baader Meinhof effect: The illusion in which a word, a name, or other thing that has recently come to one’s attention suddenly seems to appear with improbable frequency shortly afterwards.
I mean, yes! When you think about buying something but maybe you’re in doubt, you’ll see the product popping up everywhere. It’s like the outside world is trying to convince you to do it.
Functional fixedness: Limits a person to using an object only in the way it is traditionally used.
Exactly! Do you now the show Project Runway? There is a popular challenge where the contestants need to design clothing from a more unusual material than the one we’re used to. So they come up with toilet paper wedding dresses and plastic bottles sweaters. But try this one out for yourself, now, as an adult. What object can have other uses than the traditional one? Children are masters of this craft. I think that seeing things in a different light that the ‘normal’ one can relax the mind and bring some fun in life.
Gambler’s fallacy: The tendency to think that future probabilities are altered by past events, when in reality they are unchanged. The fallacy arises from an erroneous conceptualization of the law of large numbers. For example, “I’ve flipped heads with this coin five times consecutively, so the chance of tails coming out on the sixth flip is much greater than heads.
Of course it’s not the case because with every single toss you still have 50% to end up with tails and there is no influence whatsoever from past experiences. But I do admit, when cycling to the grocery store, I have some red lights. When I passed three I think that the next one will be green for sure, it just must be!
Do you recognize some of this biases? I’m happy to have discovered them so I know when my mind isn’t deducting the fact in a logical way. Or when it does it too logical like in functional fixedness, so I can play with it. The mind and me, we’re becoming best friends.
Resources and additional information.
Picture 2 found here.