Seven Behavioral Heuristics That Cause Us To Make Irrational Decisions

Priming – a reminder of a feature tees up behaviors reminiscent of that feature (asking students to read words that vaguely have to do with age causes them to walk slower)

Anchoring – behaviors cluster around a comparison to supposed “norms” (showing $149, $30 and $10 bottles of wine cause people to buy $30 bottle more often)

Framing – decisions get framed around a linguistic concept (customers seeing a sign “limit 12 per customer” take 5 rather than 2 soup cans)

Expectation – the mind makes models, and fits behaviors to the model (e.g. the placebo effect – people who are told an inert hand-cream alleviates pain notice the pain going away)

Inertia – the mind does not like expending cognitive energy. Behaviors that uphold the status quo are common (College professors rarely change their retirement asset allocation from their initial selection)

Arousal – sexual or other forms or arousal condition behaviors (a picture of a smiling woman sold insurance policies to men as well as a 5% discount)

Loss Aversion – behaviors typically minimize loss rather than maximize gain (losing money brings more pain than winning the same amount of money brings pleasure) – traders sell shares that have been going up sooner than shares that have been going down