Bias against action leads people to procrastinate making first-choice investments. When procrastinating, we may be sacrificing our long-term financial well-being. Individuals do not put enough effort in vital decisions.
Enrolment study
Madrian and Shean (2011) automatic enrolment study showed people are passive about very important economic decision. Assume $410,000 is achieved when deferring taxation until money is withdrawn. Organisations offer economic contributions to their employees up to certain amount. Most companies use “opt in” saving plan where employees must enrol on their own initiative (filling a certain form). Other firms use automatic enrolment which is a default enrolment at a set contribution rate. Employees must make an extra effort if they don not want to participate in the programme.
The difference when switching between “opt out” and “opt in” options is dramatic. When participants are asked to enrol on their own, only 49% do so. In contrast, when research participants were automatically enrolled, 86% stayed in the programme and thus achieved higher economic gains.
Adapted from
Bazerman, M.H. and Moore, D.A., 1994. Judgment in managerial decision making (p. 226). New York: Wiley.
Economists claim individuals are rational decision makers. They collect a lot of information, examine all alternatives and make decisions that maximise personal satisfaction. However, we do not make decisions in such manner. Mount Everest tragedy In 1996 two Mount Everest expedition teams were caught up in storm high up in the mountain. Both team leaders…
People predict they will repeat their previous performance exactly. Statistics tells us that extreme performance is likely to regress to the mean over time.
Describes how conjunction is judged to be more probable than a single component descriptor. Intuitively thinking, something appears to be more correct.
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