This document summarizes several cognitive biases that influence human decision-making: 1) People are biased by sunk costs and past investments which influence current decisions. 2) Prospect theory shows that people are biased by how gains and losses are framed, valuing losses more than equivalent gains. 3) The endowment effect demonstrates that people place a higher value on things merely because they own them. 4) Framing effects influence decisions based on whether options are presented in a risky or safe manner. 5) Social comparisons also create biases where people assess options relative to others rather than based on intrinsic attributes.

1. Biased 1 decisions Andrew Hingston AGSM MBA Programs

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4. what’s wrong 4 with Andy Capp’s thinking?

5. 5 We are biased by sunk costs

6. Value Quantity How we shouldthink Utility TheoryBentham and Mill19th century 6

7. We are biased by and gains losses Value Value ofgain gains losses Value ofloss Prospect TheoryKahneman and TverskyNobel Prize 2002 7

8. 8 Buy price Sell price

9. We are biased by ownership 9 Endowment EffectThaler < Buy price Sell price

10. We are biased by framing RISKY SAFE 10

11. 50% Culture 50% Relaxation 11

12. People are biased bycomparisons 20% Culture Halo effectThorndike 80% 0% Relaxation 12

13. We are allbiased … by sunk costs … by losses and gains … by ownership … by framing … by comparisons Awareness helps with alignment Recap 13

14. THANKS for being so patientwhile I separatedyou from dessert! 14