Question

Explain the three common Biases and Errors? Over Confidence Bias, Anchoring Bias, Confirmation Bias

Answer 1

Over Confidence Bias: It is the tendency of people to be more confident about their abilities than what is objectively reasonable. It is a natural human state. This bias can lead to people being less prepared for the results of their actions, or enter into dangerous situations because of overconfidence on their abilities. It can be described in three ways, namely, overestimation of ones' performance, secondly overplacement of one's performance relative to other people and thirdly overprecision in expressing unwanted certainty in the accuracy of one's belief.

Anchoring Bias: It is a bias where the person anchors his/her thinking based on a reference or starting point. For example, if we enter a store and see a shirt of $1000 and then a shirt for $100 we will perceive the second shirt as cheaper since we anchor our judgment based on the first shirt price we saw.

Confirmation Bias: Its when the person has a tendency to reconfirm his/her beliefs. The person has tendency to search, interpret, and recall information that supports his/her personal beliefs or hypothesis. It is an example of Cognitive Bias.