25 Cognitive Biases That Explain the Irrational Behaviour of Consumers

woman who is online shopping looks at her phone screen as an example for cognitive biases in decision-making

By Nine Blaess | 08:26 min

In this article
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    I have put together 25 cognitive biases and examples that explain the seemingly irrational behaviours of consumers.

    What Is a Cognitive Bias?

    A cognitive bias is an unconscious error in our thinking. It is caused by the brain constantly trying to simplify the complex world around us. This can lead us to misinterpret information, which affects the rationality and accuracy of our judgments and decision-making.

    Now, let’s get right into it.

    25 Cognitive Biases With Examples

    Cognitive Biases in This Article
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      1. Action Bias

      Why do people hoard toilet paper as a response to COVID?

      When faced with ambiguity, we prefer to do something rather than nothing—even if our actions have no real benefit.

      Example

      In soccer, goalkeepers often jump to the side during penalty kicks, when statistically, they would be better off staying in the middle of the goal.[1]

      2. Ambiguity Effect

      Why do we prefer options we know?

      Our decision-making is influenced by how much information we have on a topic. A lack of information puts us off.

      For example, online shoppers who can’t find all relevant information, say, on delivery times, will buy elsewhere.

      Example

      Research by Buddy Media (now owned by Salesforce) shows that despite the popularity of URL shorteners, user engagement is three times higher with full-length URLs. That’s because people can see what is behind them.[2]

      3. Anchoring Bias

      Why do we love to buy things at a discount?

      We often rely heavily on the first piece of information we have about a topic. When a t-shirt is discounted from $100 to $60, the anchor of the original price makes $60 seem lower.

      Example

      For the same reason, when buying a car, there is a good chance that the salesperson will show you a more expensive model before presenting you with a cheaper car.[3]

      4. Authority Bias

      Why do we trust the opinion of leaders more?

      We tend to place an irrational amount of trust in the judgement of experts and authorities.

      Example

      Lucky Strike was the first cigarette brand to exploit the authority bias by using the image of a doctor in its advertising.[4] I know, it’s hard to believe today!

      5. Availability Heuristic

      Why do we think climate change suddenly got worse?

      When making a decision, we often rely on the information we have readily available. A topic that is more frequently on our mind, e. g. through news coverage, is perceived as more serious.

      Example

      Most people fear terrorism more than they fear car accidents, even though the latter is a far more likely cause of death. Yuval Noah Harari wrote for The Guardian:

      “In 2002, at the height of the Palestinian terror campaign against Israel, when buses and restaurants were hit every few days, the yearly toll reached 451 dead Israelis. In the same year, 542 Israelis were killed in car accidents.”[5]

      6. Bandwagon Effect

      Why do trends catch on?

      We tend to adopt certain behaviours or beliefs simply because others do the same.

      Example

      The bandwagon effect is thought to influence political elections. Voters are attracted to parties or candidates they believe are popular and therefore likely to win the election.[6]

      7. Base Rate Neglect

      Why do we turn a blind eye to statistical information?

      When we make judgments, we may rely more on specific information than on statistics.

      Example

      Here is a thought experiment developed by Daniel Kahneman:

      “Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Which alternative is more probable?

      1. Linda is a bank teller.
      2. Linda is a bank teller and is active in the feminist movement.”

      Did you think the second option is more probable? It fits better into the story we made up about Linda. But statistically, option one is much more likely.[7]

      8. Cognitive Dissonance

      Why is it so hard to change our minds?

      We feel an inner conflict when experiencing opposing beliefs, attitudes or values. Therefore, we may avoid, suppress, or reject information contradicting our views.

      Example

      A study found that Israeli Jews were less favourable towards a peace plan when it was credited to the Palestinians than when it was credited to their government.[8]

      9. Confirmation Bias

      Why do we only notice what we want to see?

      We often give more attention and value to information that confirms our existing beliefs.

      Example

      Maybe we like social media so much because it shows us what we want to see.

      Social media algorithms learn what users like. They then offer corresponding information, making the user stay on the platform longer. However, this also draws the user into a spiral of the same ideas, a so-called echo chamber.

      10. Decoy Effect

      Why are services and products so often offered in three price tiers?

      We can sway a person’s decision between two options by adding a third decoy option that is more desirable than one, but less desirable than the other option.

      Example

      An example comes from the psychologist and behavioural economist Dan Ariely. For The Economist magazine, he came up with three subscription options:

      1. One-year subscription to Economist.com (full access to all online articles), US $59.00
      2. One-year subscription to The Economist print edition, US $125.00 (decoy)
      3. Print and web subscription, US $125.00 

      Introducing the decoy option led 84 % of subscribers to choose option three, compared to 32 % when no decoy was presented.[9]

      11. Empathy Gap

      Why do we have such a hard time empathising with others?

      We tend to underestimate how much our emotions influence our judgement and decisions. We find it difficult to take the perspective of someone in a different mental state from us, be it another person or our future self.

      Example

      The empathy gap is why we can find it challenging to recognise that someone does not have the same feelings towards us as we do towards them.[10]

      12. Endowment Effect

      Why do we overcharge when we sell things we own?

      We tend to value items more when we own them.

      People from individualistic cultures are more prone to self-enhancement than those from collectivistic cultures. Research suggests that this leads to a more pronounced endowment effect in Western people compared to East Asian people.[11]

      Example

      In an experiment, students received a free mug and later got the chance to sell it. Others received no gift and were later asked how much they would spend on a mug. A mug-owner valued the item twice as high as someone who hadn’t received the gift.[12]

      13. Framing Effect

      Why is a half-full cup better than a half-empty one?

      We interpret the same information differently depending on its presentation.

      Would you rather buy a juice with 90% natural ingredients or one with 10% artificial ingredients?

      Example

      Along these lines, brands can turn a disadvantage into an advantage.

      Guinness has successfully done this. The company was facing losses for taking much longer to pour than other beers. They turned their weakness into strength by creating a ritual out of the pouring process. The campaign ‘Good things come to those who wait’ was born.[13]

      14. Halo Effect

      Why do teachers expect their attractive students to perform better?

      We tend to believe that people, or things, doing well in one area will also excel in other areas.

      Example

      People associate attractive packaging with high-quality and more expensive products.[14]

      Want to learn more about this cognitive bias? I have written a detailed blog post on the Halo Effect in branding.

      Why do teachers expect their attractive students to perform better?

      We tend to believe that people, or things, doing well in one area will also excel in other areas.

      15. IKEA Effect

      Why do we value things more when we made them?

      The IKEA effect describes that we tend to value things more when we put effort into creating them.

      Example

      Dan Ariely suggests that parents value their own children more than others do because they have invested so much time and energy into raising them.[15]

      16. Loss Aversion

      Why does it hurt more to lose $100 than it feels good to gain the same amount?

      We dislike losing things more than we enjoy gaining them. In fact, the pain of a loss is twice as intense as the pleasure of gaining.[16]

      Example

      The economists Richard Thaler and Shlomo Benartzi came up with the ‘Save more tomorrow‘ pension model. Instead of paying a certain amount into their pension fund monthly, people sign up to pay a percentage of future pay-rises—let’s say, 20% of a $500 pay rise. This way it never feels like losing money.[17]

      17. Mere Exposure Effect

      Why is it that the more we see something, the more we like it?

      The more we get exposed to things, the more familiar they become and the more we tend to like them.

      Example

      One study concluded that researchers rank journals higher based on their familiarity with the author rather than the scientific contribution.[18]

      18. Noble Edge Effect

      Why do we love Patagonia?

      When companies show genuine social responsibility, they are more respected by consumers, which, in turn, leads to higher profits.

      Example

      In a wine tasting experiment, participants who were told that a winery donated 10 % of its sales revenue to charity, rated the wine higher than those who did not have this information.[19]

      19. Paradox of Choice

      Why is it so difficult to decide when faced with too many options?

      We tend to struggle to make decisions, are less satisfied with our choice, and are more likely to experience regret when presented with too many options.

      Example

      A paper points out that a typical American supermarket carries more than 30,000 items. More than 20,000 new products hit the shelves every year. And increasing choice and affluence go hand in hand with a decline in well-being.[20] I can totally relate. Can you?

      20. Peak-end rule

      Why do we remember a poor ending to a good holiday as negative altogether?

      When evaluating an experience as a whole, we tend to overrate our feelings at the peak and end, whether they are good or bad.

      Example

      Researchers found that colonoscopies were remembered as less painful when doctors extended them by a few minutes and made those extra minutes a little less painful.[21]

      21. Primacy Effect

      Why can we remember the first few items on our shopping list better?

      We tend to remember the first piece of information better than information we are presented later on.

      Example

      First impressions at a job interview count disproportionately. A survey by Simply Hired showed that 93% of hiring managers viewed coming late for an interview as extremely unfavourable.[22]

      22. Priming Effect

      Why do we think ‘yellow’ when we hear ‘lemon’?

      When we are exposed to a stimulus, it can affect our response to a subsequent stimulus because our brain stores information in clusters called schemas.

      Example

      Even a logo or brand name can trigger a certain feeling in people. For example, a study by Boston College found that video gamers who used Red Bull branded race cars were more aggressive and risk-taking.[23]

      23. Recency Effect

      Why do we remember information presented at the end of a presentation?

      We tend to remember the last piece of information better than the information presented in the middle.

      Example

      The Recency Effect is the reason why summarising helps in learning.

      24. Salience Bias

      Why can’t we resist cake?

      We tend to focus only on information that grabs our attention while ignoring less noticeable information.

      In the case of the cake, the smell and taste are more prominent than the calories and nutritional value.

      Example

      Research shows that most people enjoy the immediate feeling of a warm shower, while few are aware of how much energy and water this action involves.[24]

      25. Spotlight Effect

      Why do we think the world revolves around us?

      We tend to feel that others are paying more attention to us than they actually are.

      Example

      An experiment asked people to wear an embarrassing Barry Manilow T-shirt. The T-shirt wearers predicted that about half the people who saw them would notice the T-shirt. But in reality, only about a quarter did.[25]

      I hope you will find this list of 25 cognitive biases helpful.

      If you have questions, input or know of other great examples, I would love to hear from you.

      References

      [1] Bar-Eli, M., Azar, O. H., Ritov, I., Keidar-Levin, Y., & Schein, G. (2007). Action bias among elite soccer goalkeepers: The case of penalty kicks. Journal of Economic Psychology, 28 (5), 606-621.

      [2] Eduardo A. Schilman. The Ambiguity Effect. Singulariteam. http://www.singulariteam.com/theembiguity%20effect.html

      [3] Kendra Cherry (2020). How Anchoring Bias Psychology Affects Decision Making. verywell mind. https://www.verywellmind.com/what-is-the-anchoring-bias-2795029

      [4] The Behaviours Agency. Authority Bias: The Behavioural Bias Series. https://thebehavioursagency.com/authority-bias/

      [5] The Guardian (2015). Yuval Noah Harari: the theatre of terror. https://www.theguardian.com/books/2015/jan/31/terrorism-spectacle-how-states-respond-yuval-noah-harari-sapiens 

      [6] The Decision Lab. Why do we support opinions as they become more popular? https://thedecisionlab.com/biases/bandwagon-effect/#section-8

      [7], [12] Daniel Kahneman (2012). Thinking, Fast and Slow. Penguin Books Ltd

      [8] The Decision Lab. Why is it so hard to change someone’s beliefs? https://thedecisionlab.com/biases/cognitive-dissonance/

      [9], [17] Rory Sutherland (2019). Alchemy: The Surprising Power of Ideas That Don’t Make Sense. Penguin Random House

      [10] Effektivilogy. The Empathy Gap: Why People Fail to Understand Different Perspectives. https://effectiviology.com/empathy-gap/#Types_of_empathy_gaps

      [11] The Decision Lab. Why do we value items more if they belong to us? https://thedecisionlab.com/biases/endowment-effect/

      [13] Martin Lindstrom (2008). Buyology : Truth and Lies About Why We Buy. Crown Business

      [14] Orth, Ulrich R., et al. “Formation of Consumer Price Expectation Based on Package Design: Attractive and Quality Routes.”  Journal of Marketing Theory and Practice, vol. 18, no. 1, M.E. Sharpe, Inc., 2010, pp. 23–40, http://www.jstor.org/stable/40470437.

      [15] YouTube. The IKEA Effect, by Dan Ariely. https://www.youtube.com/watch?v=jkaWYKlnli0

      [16] The Decision Lab. Why do we buy insurance? https://thedecisionlab.com/biases/loss-aversion/

      [18] The Decision Lab. Why do we prefer things that we are familiar with? https://thedecisionlab.com/biases/mere-exposure-effect/

      [19] The Decision Lab. Why do we tend to favor brands that show care for societal issues? https://thedecisionlab.com/biases/noble-edge-effect/

      [20] John Wiley & Sons, Inc. (2004). Positive Psychology
      in Practice. John Wiley & Sons, Inc. https://www.researchgate.net/profile/Julian-Barling/publication/232553222_Leading_Well_Transformational_Leadership_and_Well-Being/links/59f7575baca272607e2d7da9/Leading-Well-Transformational-Leadership-and-Well-Being.pdf#page=110

      [21] Kent Hendricks (2019). The peak–end rule. https://kenthendricks.com/peak-end-rule/

      [22] The Decision Lab. Why do we only remember the first things on our grocery list? https://thedecisionlab.com/biases/primacy-effect/

      [23] Boston College. “Energy drink logo enough to shape consumer performance, study finds.” ScienceDaily. ScienceDaily, 31 January 2011. www.sciencedaily.com/releases/2011/01/110131133125.htm.

      [24] Tiefenbeck, Verena; Goette, Lorenz; Degen, Kathrin; Tasic, Vojkan; Fleisch, Elgar; Lalive, Rafael; Staake, Thorsten (2018). Overcoming Salience Bias: How Real-Time Feedback Fosters Resource Conservation. https://doi.org/10.3929/ethz-b-000122629

      [25] Crystal Raypole. Heathline. Always Feeling Self-Conscious? Here’s Why You Shouldn’t, According to Science. https://www.healthline.com/health/mental-health/spotlight-effect#takeaway

      Cover image by cottonbro from Pexels

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