Section Three: fill in the Blank Questions

$\backslash$table$[[$Heuristic$,$illusion of control,excessive optimism,Self$-$Attribution error,availability$],[$anchoring$,\backslash$table$[[$ambiguity$],[$aversion$]],$representativeness,hindsight bias,overconfidence$],[$mental accounting,confirmation bias,House money effect,bias,home bias$],[$affect$,$winner's curse,Gambler's Fallacy,Ultimatum,framing$]]$

is a predisposition toward error $($examples: excessive confirmation bias, illusion of control$)$

people overestimate how frequently they will experience favorable outcomes anu underestimate how frequently they will experience unfavorable outcomes $($example: delay cost cutting during a business recession, leading to lower profits$)$

people make mistakes more frequently than they believe and view themselves as deucr ulan average $($example: make inferior acquisitions when cashrich, reduces firm value because risk underestimated

people attach too much importance to information that supports their views relative to information that runs counter to their views $($example: ignoring information that is counter to current viewpoint, lowers profits from delayed reaction to changing environment

Africa just tossed a coin three times and got heads every time. She thinks it is very likely that tails will appear next. This is an example of

people overestimate the extent to which they can control $-$ling own degree of control, results in higher costs than events $($exarat

is a rule of thumb used to make a decision $($examples representativeness, availability, anchoring, aftect$)$

people make judgements based on stereotypic thinking. asking how representative an object or idea is for the class to which it belongs $($example: choosing wrong projects based on biased forecasts, reduces firm value because NPV isn't maximized$)$

people overweight information that is readily available and intuitive relative to information that is less salient and more abstract$,$ thereby biasing judgements $($example: choosing wrong projects based on biased forecasts, reduces firm value because of misjudged priorities and risks$)$

$1$c people form an estimate by beginning with an initial number and adjusting to renect new information or circumstances, however, they tend to make insufficient adjustments relative to that number, thereby leading to anchoring bias $($example: become fixated on a number and adjust insufficiently$).$

basing decisions primarily on intuition, instinct, and gut feeling $($example: relying on instincts instead of formal valuation analysis, reduces firm value because negative NPV projects adopted$)$

a person's decisions are influenced by the manner in which the setting for une ucciann is described $($examples: loss aversion, aversion to a sure loss$)$

the winning bid in an auction results in the winner overpaying known

a

Annie just won $$100,000$ in Las Vegas. Now she is doubli even bigger wagers than previously. This is an example of

$15$ f when people trying to avoid uncertain probability distributions

propensity for people to make investments in home country rather than internationally, may feel like they have an information advantage in local markets

is type of framing effect, segregate certain decisions

$.($example: having one risky an and one comservative portfolio$)$ taking eredit for good outcomes and blaming others for bad outcomes, relates to overconfidence

In this game, subjects are paired anomymously. The Proposer is given sone money and decides how much to send the

tendency to look back at an umpedictable cvent and think it