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Organizational Behavior: Common Biases and Errors in Decision Making

This document discusses common biases and errors in decision making. It outlines 8 biases: overconfidence bias, anchoring bias, confirmation bias, availability bias, escalation of commitment, randomness error, risk aversion, and hindsight bias. For each bias, it provides a brief definition and example of how the bias can negatively impact decision making. The overall message is that being aware of these common cognitive biases can help improve decision making and reduce errors.

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nikhil
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296 views

Organizational Behavior: Common Biases and Errors in Decision Making

This document discusses common biases and errors in decision making. It outlines 8 biases: overconfidence bias, anchoring bias, confirmation bias, availability bias, escalation of commitment, randomness error, risk aversion, and hindsight bias. For each bias, it provides a brief definition and example of how the bias can negatively impact decision making. The overall message is that being aware of these common cognitive biases can help improve decision making and reduce errors.

Uploaded by

nikhil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Organizational Behavior

Common Biases and Errors in Decision


Making

Faculty Name: Student Name:


Mr. Ashutosh Shukla Nikhil Yadav
Assistant Professor PG/25/053
Content
• Decision making
• Common biases and errors in decision making
Decision making
• The action or process of making important decisions.

• Decision making is the process of identifying and choosing


alternatives based on the values, preferences and beliefs of the
decision –maker.
Common biases and errors in decision
making
• Overconfidence bias
• Anchoring bias
• Confirmation bias
• Availability bias
• Escalation of commitment
• Randomness error
• Risk aversion
• Hindsight bias
Overconfidence bias

• This is when we are given factual questions and asked to judge the
probability that our answers are correct we tend to be far too
optimistic.
Anchoring bias

• This is the tendency to fixate on initial information and fail to


adequately adjust for subsequent information.

• For example: When a prospective employer asks how much you made
in your prior job, your answer typically anchors the employer’s offer.
Confirmation bias

• This represents a specific case of selective perception:

• We seek out information that reaffirms our past choices and we


discount information that contradicts them.

• We are most prone to the confirmation bias when we believe we have


good information and strongly believe in our opinions.
Availability bias

• This is our tendency to base judgements on information that is readily


available.

• The easier something is to recall, the more important it seems.

• For example: more people fear flying than fear driving in a car
because the media gives much more attention to air accidents, we
tend to overstate the risk of flying and understate the risk of driving.
Escalation of commitment

• This refers to staying with a decision even when there is clear


evidence it’s wrong.

• Individuals feel that they have invested so much time and energy in
making their decisions that they have convinced themselves they are
taking the right course of action and don’t update their knowledge in
the face of new information.
Randomness error

• This is our tendency to believe we can predict the outcome of random


events.

• Decision making suffers when we try to create meaning in random


event, particularly when we turn imaginary patterns into
superstitions.
Risk aversion

• This is the tendency to prefer a sure thing over a risky outcome.

• When a risky investment isn’t paying off, most people would rather
play it safe and cut their losses, but if they think the outcome is a sure
thing they will keep escalating.
Hindsight bias

• This is the tendency to believe falsely, after the outcome is known,


that we have accurately predicted it.

• The hindsight bias reduces our ability to learn from the past. It let us
think we’re better predictors than we are and can make us falsely
confident.
• Thank you….

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