Cognitive Biases

Which cognitive bias is present when someone follows others’ actions without thinking?

• Herd Mentality

• Loss Aversion

• Overconfidence

• Sunk Cost Fallacy

What percentage of people make purchases due to FOMO?

• 20%

• 40%

• 60%

• 80%

tendency to follow through on an endeavor if we have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits

• Overconfidence
• Herd Mentality
• Sunk Cost Fallacy
• In-group Bias

What strategy helps overcome the Sunk Cost Fallacy?

• Focus on future benefits rather than past investments

• Continue investing because of time spent

• Ignore advice

• Follow what others are doing

Naomi is considering taking a gap year after graduating high school to travel and do a coding boot camp. However, she’s doubting her decision because most people from her high school plan to go to a 4-yearuniversity after graduating.

• Confirmation Bias

• Hedonic Adaptation

• Herd Mentality

• FOMO (Fear of Missing Out)

What is the first step to overcoming FOMO?

• Limiting social media use

• Consulting with friends before buying

• Giving in to the impulse to purchase

• Ignoring any financial advice

You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?

• Herd Mentality

• Loss Aversion

• Hedonic Adaptation

• Fear of Missing Out (FOMO)

Mr. Tillman has played tennis on and off with friends and finds that he’s pretty decent at the game due to his excellent hand-eye coordination and general athleticism. He’s convinced that he can beat Mr. Adams. Which cognitive Bias is at play here?

• A. Endowment Effect

• B. Overconfidence

• C. Herd Immunity

• D. Action Bias

• E. None of the above

What is the sunk cost fallacy?

• A) A tendency to focus on negative comments

• B) A tendency to continue a behavior because of previously invested resources

• C) A tendency to notice things you are paying attention to

• D) A tendency to avoid making decisions

FOMO is the same as Loss Aversion.

• True

• False