Economics Cognitive Biases Questions
Confirmation bias is a cognitive bias where individuals tend to seek, interpret, and remember information in a way that confirms their preexisting beliefs or hypotheses. In the context of economics, confirmation bias can impact economic behavior by influencing individuals to selectively gather and process information that supports their existing views, while disregarding or dismissing contradictory evidence. This bias can lead to distorted decision-making, as individuals may overlook alternative perspectives or fail to consider all available information, resulting in suboptimal economic choices. Confirmation bias can also contribute to the formation and persistence of economic bubbles, as individuals may selectively focus on positive information and ignore warning signs or negative indicators. Overall, confirmation bias can hinder rational economic decision-making and impede the ability to accurately assess risks and make informed choices.