Dunham BUS 682 Psychological Bias. The field of behavioral economics is concerned with studying the effects of psychology on the decision-making processes of individuals and institutions. While neoclassical economics and rational choice theory assume that humans act rationally in their own self-interest the relatively new field of behavioral economics challenges these assumptions by exploring how psychological or cognitive biases circumvent the rationality of agents. A common theme in behavioral economics is the acknowledgement that cognitive bias, emotion, and social influence lead humans to make irrational decisions. Heuristics or mental shortcuts are relied upon to make hasty decisions. The “behavioral turn” in economics is evidenced by several behavioral scholars being awarded the Nobel Memorial Prize in Economic Sciences—including Daniel Kahneman (2002), Robert Shiller (2013), and Richard Thaler (2017)—for their insights into understanding human behavior.

Psychological bias can lead to irrational decision-making in a variety of ways. For example, psychological bias contributes to discrimination in the workplace. Unconscious or implicit bias refers to attitudes or beliefs that exist without an individual’s awareness. For example, stereotyping may lead to false assumptions about the characteristics of an individual based on preconceived notions about the given group to which the individual belongs. Implicit biases are different that explicit beliefs and attitudes, which individuals are aware of, yet may conceal for the purposes of avoiding judgement or complying with norms. Furthermore, it is possible for an individual to have an unconscious bias that they consciously oppose.

Dunham BUS 682 Psychological BiasWhile by no means exhaustive, the following are examples of biases that may contribute to discrimination.

  • Affinity bias – The tendency to favor people who share similar qualities to ourselves
  • Beauty bias – Judging or favoring people based on how they look
  • Bandwagon effect – Tendency to believe something because many other people hold the same beliefs
  • Confirmation bias – Tendency to focus on and favor information that confirms previously held beliefs
  • Conformity bias/Groupthink – Desire for harmony or conformity in a group results in a group member’s suppression of critical or alternative viewpoints in order to minimize conflict
  • Curse of knowledge – Relatively more informed people may find it difficult to perceive problems from the perspective of those that are less informed
  • Gender centrism – Tendency for a gendered point of view to influence one’s world view
  • Ingroup bias – Tendency to give preferential treatment to people who are perceived to be members of our own group(s)
  • Naïve realism – The belief that we see reality objectively without bias and that those with opposing viewpoints are incorrect, irrational, or uninformed
  • Outgroup homogeneity bias – Individuals perceive more variation amongst members of their own group than in members of other groups
  • Status quo bias – The tendency to like things to stay relatively the same
  • Survivorship bias – Tendency to concentrate on the people or groups that survived and inadvertently overlook those that didn’t

Reflect upon the above list of psychological biases and consider how they may reveal themselves in your own life. Also consider how these biases may lead to discrimination. Then answer the questions in the space provided below

Can you think of an example of a bias that is not listed? Please explain this bias.

Have you ever caught yourself relying upon psychological bias to comprehend your surroundings or make a decision? Please explain.

How you ever felt that others were using psychological biases to evaluate or judge you?

How can psychological bias manifest itself in the workplace? Explain.


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