Decision traps and biasis Essay Example | Topics and Well Written Essays - 250 words

Decision traps and biasis - Essay Example For example, if the probability of a person having AIDS is 0.0001, but a test shows that 100 people out of 10,000 have the disease, a person will tend to think that the population has a higher chance of having AIDS, rather than considering the an\mount of false positives. The gambler’s fallacy is when an individual erroneously believes that the occurrence of a certain event is based on the occurrence of a previous event; believing that since an event has occurred a lot of times, it will not occur again in the near future. Anchoring with insufficient adjustment occurs when an individual tries to make a decision by considering the first instance of the decision variable and adjusting upwards or downwards without considering whether the variable selected is sufficient for the decision. The other factor that affects individual when making a decision is overconfidence, an instance when an individual thinks that the probability of being right is very high, therefore, leading the individual to think that a negative outcome cannot be expected. This also leads to search for information that only confirms a decision, instead of looking for information that supports both the positive and negative sides of a decision. The search for only confirming information will lead an individual to make a decision without considering the negative implications. The last factor, hindsight bias, occurs when an individual considers events as more predictable than they really are, leading the individual to make wrong decisions. The biases listed above can be avoided by a simple sequence of events; finding the decision problem, gathering as much information on the problem as possible, and dividing the information into positive and negative effects. After this is done, a decision should be made based purely on the pros and cons identified, or the individual can consult other individuals to help in the decision-making process. The individual can also look at the