The illusion of explanatory depth (IOED) describes our belief that we understand more about the world than we actually do. It is often not until we are asked to actually explain a concept that we come face to face with our limited understanding of it.
The representativeness heuristic is a mental shortcut that we use when making judgments about the probability. Specifically, when we are trying to assess how likely it is that an event or object A belongs to class B, we tend to make this judgment based on how closely A resembles B (or how representative we believe A is for B).
Heuristics are mental shortcuts we use to make problem-solving and decision-making easier. One type of heuristic is the affect heuristic, which specifically refers to how we can rely on our emotions when making decisions, which allows us to reach a conclusion quickly and without much effortful thought.
Category size bias describes our tendency to believe outcomes are more likely to occur if they are part of a large category rather than part of a small category, even if each outcome is equally likely. While the bias is based on experimental studies that have been successfully replicated, the interpretation of the evidence remains mixed.
The cashless effect describes our tendency to be more willing to pay when there is no physical money involved in a transaction. It means that we are more likely to purchase something on a credit card than if we have to pay for it with cash.1
The bottom dollar effect describes our tendency to dislike products and services that exhaust our remaining budget. We are less satisfied with our purchases if they cause a strain on our finances.
The bundling bias describes our tendency not to use up all the experiences that are bought as a group, which means that we don’t get the full value of a bundle compared to an individual purchase.
The gambler’s fallacy describes our belief that the probability of a random event occurring in the future is influenced by previous instances of that type of event.
The halo effect is a cognitive bias that claims that positive impressions of people, brands, and products in one area positively influence our feelings in another area.
