Cognitive Biases: Understanding Decision-Making Influences PPT
This PPT slide, part of the 29-slide Building Blocks of Behavioral Strategy PowerPoint presentation, presents a detailed overview of 3 cognitive biases that can significantly impact decision-making: Mental Accounting, Availability Bias, and Framing Bias. Each bias is defined and illustrated with examples to highlight their implications on financial behavior and risk assessment.
Mental Accounting refers to the cognitive process where individuals categorize and treat money differently based on subjective criteria. For instance, people might segregate their retirement funds from everyday spending, leading to potentially irrational financial decisions. This bias can result in suboptimal investment choices, as individuals may fail to view their overall financial situation holistically.
Availability Bias is explained as the tendency for decision-makers to prioritize recent information over historical data. This bias can distort perceptions of risk and probability. The example of shark attacks illustrates how recent news can skew an individual's assessment of danger, causing them to overestimate the likelihood of such events and alter their behavior irrationally.
Framing Bias describes how the presentation of information can influence decision-making. The slide provides a compelling example involving medical statistics. When patients learn about a 20% mortality rate, they may react negatively. Conversely, if the same statistic is framed as an 80% survival rate, the emotional response shifts positively. This demonstrates how the framing of information can lead to different decisions, even when the underlying data remains unchanged.
Overall, the slide emphasizes the importance of recognizing these biases to improve decision-making processes. Awareness is presented as the first step towards mitigating their effects. Understanding these biases can lead to more rational and informed choices, ultimately enhancing strategic outcomes.
This slide is part of the Building Blocks of Behavioral Strategy PowerPoint presentation.
EXPLORE MORE SLIDES FROM THIS PRESENTATION
EXPLORE MORE PRESENTATIONS ON
Decision Making Behavioral Economics Cognitive Bias Behavioral Strategy
Flevy is the world's largest knowledge base of best practices.
Leverage the Experience of Experts.
Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.
Download Immediately and Use.
Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.
Save Time, Effort, and Money.
Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.
