Individuals rely on rules of thumb (heuristics) to lessen the information processing demands of making decisions. Heuristics reduce the effort people must put into making decisions by allowing them to examine fewer pieces of information, simplify the weights of information, process less information and consider fewer alternatives in making decisions.
Heuristics may assist us in making producing effective decisions, but it can also lead to systematically biased judgements. When individuals inappropriately apply heuristics, they result in biases. Even most intelligent people are suspect able to biases that result from inappropriate use of heuristics.
Inappropriate application of heuristics results in making decisions that are drastically different from one another. We may incorrectly apply the same decision process that was successful in the past but to a completely different context in the future.
We do not receive clear signals about the quality of our decisions, but may excessively rely on our intuition in determining if to use a particular problem-solving strategy in the future. This may result in systematic errors.
In general there are three general heuristics namely availability, representative and confirmation heuristics. They encompass eleven specific biases. When heuristics are inappropriately applied, they become biases.
Bazerman, M.H. and Moore, D.A., 1994. Judgment in managerial decision making (p. 226). New York: Wiley.