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. Biased1decisionsAndrew HingstonAGSM MBA Programs

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4. what’s wrong4with Andy Capp’s thinking?

5. 5We are biased bysunkcosts

6. ValueQuantityHow we shouldthinkUtility TheoryBentham and Mill19th century6

7. We are biased by andgainslossesValueValue ofgaingainslossesValue oflossProspect TheoryKahneman and TverskyNobel Prize 20027

8. 8Buy priceSell price

9. We are biased by ownership9Endowment EffectThaler<Buy priceSell price

10. We are biased byframingRISKYSAFE10

11. 50%Culture50%Relaxation11

12. People are biased bycomparisons20%CultureHalo effectThorndike80%0%Relaxation12

13. We are allbiased… by sunk costs… by losses and gains… by ownership… by framing… by comparisonsAwareness helps with alignmentRecap13

14. THANKSfor being so patientwhile I separatedyou from dessert!14