Search results
Results from the WOW.Com Content Network
The planning fallacy is a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual's knowledge that past tasks of a similar nature have taken longer to complete than generally planned.
The planning fallacy is the tendency to overestimate benefits and underestimate costs, impelling people to begin risky projects. In 2002, American kitchen remodeling was expected on average to cost $18,658, but actually cost $38,769.
Escalation of commitment, irrational escalation, or sunk cost fallacy, where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong. G. I. Joe fallacy, the tendency to think that knowing about cognitive bias is enough to overcome it. [66]
It also means people fall into the sunk cost fallacy. Although people should ignore sunk costs and make rational decisions when planning for the future, time, money, and effort often make people continue to maintain this relationship, which is equivalent to continuing to invest in failed projects.
The planning fallacy describes the tendency for people to overestimate their rate of work or to underestimate how long it will take them to get things done. [9] It is strongest for long and complicated tasks, and disappears or reverses for simple tasks that are quick to complete.
Optimism bias influences decisions and forecasts in policy, planning, and management, e.g., the costs and completion times of planned decisions tend to be underestimated and the benefits overestimated due to optimism bias. The term planning fallacy for this effect was first proposed by Daniel Kahneman and Amos Tversky.
The hiding hand principle is a theory that offers a framework to examine how ignorance (particularly concerning future obstacles when person first decides to take on a project) intersects with rational choice to undertake a project; the intersection is seen to provoke creative success over the obstacles through the deduction that it is too late to abandon the project.
In finance, survivorship bias is the tendency for failed companies to be excluded from performance studies because they no longer exist. It often causes the results of studies to skew higher because only companies that were successful enough to survive until the end of the period are included.