availability heuristic

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An entire King of Queens episode devoted to behavioral finance and economics. Doug gets a Christmas bonus. He and Carrie decide not to spend their windfall (mental accounting). Doug wants to put it in the bank, while Carrie pushes for a high-flying internet stock (herd behavior). The stock goes up for one day, but quickly falls. They don’t sell because it’s too painful. They hold out, hoping the stock will recover (loss aversion). The stock continues to fall and they finally sell at the bottom. Then they notice news about government approval, the stock rallies, and they buy back in (availability bias). It’s all wrapped up in a syrupy sitcom message about the meaning of Christmas.

Hat tip: Rodrigo Sanchez.

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1) Taxes are more effective than subsidies in cutting calorie consumption. Hat tip: Farnam Street.

2) Airport security and snow removal have the availability heuristic in common. Hat tip: Mike Dariano.

3) Computer science professors want to develop “privacy nudges” that alert people to the long-run costs of turning over their personal data to private companies.

4) Loss aversion and the endowment effect at work in ticket prices for Sunday’s gold medal hockey game. Hat tip: David Karp.

5) Embracing small failures can help you learn and succeed.

6) McKinsey releases a marketer’s guide to behavioral economics. Hat tip: Simoleon Sense.

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