Describe the illusion of control and its significance in economic decision-making.

Describe the illusion of control and its significance in economic decision-making.

The illusion of control refers to the tendency of individuals to overestimate their ability to control or influence outcomes that are actually determined by chance or external factors. In economic decision-making, this bias can lead individuals to believe that they have more control over the outcomes of their actions than they actually do. This can result in individuals taking excessive risks or making suboptimal decisions based on their perceived control, rather than objectively assessing the probabilities and potential outcomes. The illusion of control can have significant implications in economic decision-making as it can lead to irrational behavior, poor investment choices, and ultimately financial losses.