Irrational Behaviour

• Irrational Behaviour

  • It's when people make systematic and persistent deviations from rational choices
• Emotional decision-making

  • Where people make decisions based on feelings rather than logical analysis
• Altruism

  • The act of being selfless and doing something in benefit others. without expecting anything in return.
• Loss Aversion

  • The idea that people are more sensitive to losses than to equivilant gains
• Reasons for departure from rational choice

  1. They are lose averse (loss matters more than gains)
  2. Have a limited capacity to calculate all costs & benefits (lack perfect information)
  3. Are often influenced by their own social networks (herd mentality)
  4. Often act reciprocally instead of pure self interest (altruism)
  5. Lack self control and seek immediate satisfaction
  6. They make different choices in cold & emotional states
  7. Have a strong default to maintain the status quo
  8. Often fall back on simple rules of the thumb when choosing
• Framing Bias

  • It's the idea that the way information is presented can influence peoples decisions and judgements
• The "dread risk" framing

  • Presenting a risk term of " how many people will die" rather than "how many people will be saved" can lead to different decisions
• The "choice architecture" framing

  • Arranging options in a specific order or highlighting certain options can influence what people choose
• The "decoy" effect

  • Offering a new attractive option alongside two more desirable options can make one of the desirable options seem even more attractive
• The "scarcity" effect

  • Highlighting limited availability can create a sense of urgency and drive people to act quickly
• Habitual Behaviour

  • People often develop habits around purchasing and consuming certain products & services, which can influence demand
  • Habits can be seen as a type of "automatic" or "unconscious" decision-making, where people act out of habit rather than consciously evaluating their options and making a rational choice
• Anchoring Bias

  • The tendency to rely and base their decisions on the first piece of information offered
• Confirmation Bias

  • The tendency to seek out and remember information that confirms out existing beliefs and ignore information that contradicts them
• Availability Bias

  • The tendency to give more weight to information that is easily accessible in our memory
• Overconfidence Bias

  • The tendency to be overconfident in our own abilities & knowledge
• Sunk Cost Fallacy

  • The tendency ton continue investing in something because of the resources we've already invested, even if it's not a good idea
• Bound Rationality

  • Its the idea that people don't always make perfectly rational decisions. They may be influenced by cognitive bias, emotions, social norms and limited information or time to make decisions. People make decisions that are completely rational from the decision - making perspective (Evaluation).
• Heuristics

  • They are mental shortcuts that many people use in their day-do-day lives to simply complex decisions. Saves time and cognitive effort, but they can lead to suboptimal decisions. They help people cut through noise and make decisions quickly, even if they're not always perfect