Confirmation bias
Confirmation bias is a psychological process that results in a person’s preference for the reality that fits their own preconceived ideas. It is especially strong in groups that share a common ideology. The belief system shapes social reality. The more people are convinced of the ideology, the stronger their confirmation bias will be.
There are a number of reasons why people adopt confirmation bias. It may be adaptive for maintaining stereotypes, gender stereotypes, and ethnocentric attitudes. Alternatively, it might have evolved in ancestral groups for promoting SFPs (social form preferences) that serve the group collective. Moreover, it could even have evolved as a way to promote social projects or tribal organizations.
Confirmation bias is often triggered by experiences, events, or information. This bias is particularly strong in social beliefs about other people. When these beliefs are prompted by powerful individuals, the subjects tend to be more inclined to confirm them with behavior. In addition, powerful individuals tend to have stronger confirmation bias than powerless ones.
Inequity aversion
Researchers have examined the question of whether inequity aversion affects foreign currency exchange rates. They examined the percentage of successful exchanges, reward quality, and working effort, and found that the two groups were not significantly different. In addition, there was no evidence that either condition elicits aversion behaviors.
In humans, inequity aversion is manifested by a negative reaction to receiving less than one’s peer. Likewise, the same behavior is observed in animals. For instance, carrion crows exchange less food or gifts with their partners when they receive less than their peers.
Inequity aversion has been argued to be an essential trait for cooperation in multilateral settings. It is closely related to public goods games, where subjects choose to sacrifice their own money to reduce the income of group members who earn more than they do. Ultimately, individuals who free-ride on the contributions of others will suffer as a result.
Inertia
Behavioral economists have been analyzing why a person might hold a particular opinion, and a recent study reveals that behavior is influenced by inertia. Inertia is the tendency to hold a position for a long time without adjusting it later. It is thought to occur due to a preference for consistency.
To test the impact of inertia on foreign exchange rate behavior, we conducted an experiment. In the experiment, we used a conditional free-draw situation. The results of the experiment indicated that when the response time was free-draw, it was significantly slower than in the conditional forced draw.
Status quo bias
The status quo bias is a common tendency that many people have when making personal financial decisions. For example, a person may inherit shares of stock they would never have bought. In order to avoid upsetting the status quo, they won’t sell them. Instead, they refrain from taking action, saying they’ll think about it later.
The status quo bias can lead to suboptimal decisions. This is often the result of the psychological phenomenon of loss aversion, which leads people to view the status quo as superior to alternatives. This can also be a result of sunk-cost thinking, or a need to feel in control of situations.