Bias 13: Base Rate Fallacy

If a test to detect a disease whose prevalence is 1/1000 has a false positive rate of 5%, what is the chance that a person found to have a positive result actually has the disease, assuming you know nothing about the person’s symptoms or signs? This question had been asked to 60 Harvard Medical students…

Bias 9: Gambler’s Fallcy

We need to recruit a junior manager for our retail department. We know that a lot of people are qualified for this job, equally men and women. Today, we are suppose to meet ten candidates. This morning, we have met six female candidates. What are the most probable genders of the next candidates, in the…

Bias 12: Framing effect

You are the head of an industrial company operating 600 plants with severe economic problems. After discussion with your strategic committee, two options have been retained. You have to decide which one to choose. What do you do? Option A: 200 plants will be saved. Option B: 33% chance that your 600 plants will be saved…

Bias 11: Anchoring Effect

  You have to hire one candidate among two for a given position. You look at the reports of the HR interviews and find the follwoing key conclusions of the reports. Sophie: smart-kind-pretty-genereous-careless-messy-lazy Margaret: lazy-messy-careless-genereous-pretty-kind-smart Who do you hire? Have a second look at their description…aren’t they the same? Anchoring effect is the fact to overweigh the…

Bias 10: Regression to the Average

Your company has 3 shops of the same size with the same products. The predictions are that the total sales of your company will increase by 10% in 2013. Complete the following tab: 2012 2013 Shop 1 10 000 ? Shop 2 20 000 ? Shop 3 100 000 ? TOTAL 130 000 143 000…

Bias 8: Syllogism Fallacy

Diversified portfolios have lower risk. Some low-risk portfolios are constituted of Treasury Securities. Therefore, some diversified portfolios are constituted of Treasury Securities. Is this correct? Taken independently, the sentences are correct. Yet, the logic in between them is not correct. If we read it rapidly, we tend to skip this point and agree with the statement….

Bias 7: The Law of Small Number

A study carried out by an eminent institution in a poor, tropical country reveals that 20% of the inhabitants of a small rural village have a psychological disease whose average prevalence in the country is 1%. This region is very dry so their inhabitants lack vitamin C. Moreover, the level of endogamy is particularly high…

Bias 6: Endowment Effect

You want to go to the concert of your favorite singer. The price of the tickets is normally €30 but they are sold out. You are willing to pay up to €70 for this ticket because you really want to go to this concert. You find a ticket at this price on the Internet and…

Bias 5: Moral Dilemma

  Mathematically, both situations are identical. You save 5 lives compared to 1; however, the second case directly involves our responsibility. WE kill the fat man to save the others. The latter situation is thus highly emotional and most people prefer to do nothing. Contrary to the first situation, pushing the fat man involves our ventromedial…

Bias 4: Reasoning Fallacy

Autho Answer 1: The answer is 47 ( the patch was twice as small on the 47th day – half the size of the lake). Most people answer 24. Answer 2 : Most people, even in famous American universities such as MIT or Harvard, answer 10 ct for the first question (the right answer is 5 ct)…

Bias 3: Ratio Bias

Author: Tiphaine Saltini As purchasing managers in a cosmetics firm, we can buy two kinds of skin-care products from our supplier: Product 1:  Has a risk of 2.4% to trigger skin allergies Product 2: Has caused skin allergies in 223 people among 9325 Which one do you buy (try not to make the calculation)? The risk…

Bias 2: Herding Effect

    We are all influenced by the opinions expressed by others when making decisions. This natural tendency results from the anchoring effect, which occurs when we rely too heavily on the first piece of information, no matter how irrelevant, when making decisions. Psychological experiments have shown that asking participants the last two numbers of their credit card influences their…