Notes Psychology

27 Mental Models from Psychology and Behavioral Economics

27 Mental Models from Psychology and Behavioral Economics 1

Here is a list of twenty-seven alphabetized mental models from behavioral economics and psychology, briefly explained.

Availability Heuristic: Kahneman discovered that we tend to remember what is most salient and frequent. To have a truly comprehensive memory would be debilitating.

Anchoring: The human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.

Bounded Rationality: People are limited by their knowledge, cognitive biases, and time. They are not optimizing their decisions, but satisficing. .

Boredom Syndrome: Most humans have the tendency to need to act, even when their actions are not needed. We also tend to offer solutions even when we do not have knowledge to solve the problem.

Choice Overload: Too many options lead to difficulty in decision-making.

Cognitive Dissonance: When people’s beliefs do not match up with their behaviors.

Commitment and Consistency Bias: People keep their prior commitments; they stay consistent with their prior selves. This is sometimes useful socially but can be foolish in the long run.

Confirmation Bias: People to choose to see information that affirms their beliefs.

Decoy Effect: People will change their preference between two options when presented with a third option.

Dunning-Kruger Effect: Ignorant or unskilled people believe they are more competent than they are.

Endowment Effect: When people own something, they irrationally overvalue it.

First-Conclusion Bias: Once we make our first conclusion about something, we stop thinking about it. Good for energy conservation but leads to errors.

Framing Effect: People react to a choice differently. depending on how it’s presented.

Fundamental Attribution Error: Over-ascribe behavior of others to their innate traits rather than circumstantial factors, leading us to misread how they will behave in the future.

Halo Effect: The impression we have of someone influences how we think about other aspects about them.  

Hedonic Adaptation: People return to their default level of happiness, despite major positive or negative events.

Hindsight Bias: When you know the outcome, it’s easy to fool yourself into believing that you knew it all along.

Licensing Effect: If you do something positive, you allow yourself an indulgence.

Loss Aversion: People prefer to avoid losing 100 dollars than gaining 100 dollars.

Social Proof: The more there are people who do something, the safer we feel doing it ourselves.

Survivorship Bias: Those that survive the past can write about it, but there are many untold stories. We undervalue luck and overvalue the few stories we have access to.

Over-justification Effect: When given a reward for an activity, the intrinsic pleasure gained from doing it decreases.

Partitioning: When a product is divided into smaller units, consumers face more decision points and consume less of it.

Pavlovian Association: Humans, like salivating dogs, feel negative and positive emotion towards intangible objects, with emotions coming from past associations, not direct causes.

Peak-End Rule: An experience is judged on how it was felt at its most intense point and at the end than on the average of every moment of experience.

Priming: A stimulus affects how a person behaves.  

Time Discounting: People value things now more than later, even if waiting brings more valuable.

"A gilded No is more satisfactory than a dry yes" - Gracian

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