behavioral economics: 6 common mistakes of decision making

1. Overconfidence – People assume they are more competent than they really are, leading to poor decision making. 2. Anchoring – People become too focused on their initial assessment and fail to properly assess new information. 3. Framing – People’s decisions are affected by how a problem is framed, leading to irrational decisions based on partial information. 4. Availability Bias – People judge the likelihood of an event by the availability of examples; in other words, they overvalue easily remembered information. 5. Status Quo Bias – People are too resistant to change and are reluctant to make a better decision even when one might be available. 6. Herd Mentality – People rapidly copy the behavior of others, regardless of the facts. This can result in improperly weighted decision making and irrational herd behavior.