Confirmation bias
Topic: Schools of Economic Thought and Economic Laws · NCERT: Beyond NCERT
Meaning
Confirmation bias is the habit of seeking, noticing and interpreting information in ways that support what one already believes. Evidence against one's view is ignored or explained away. It makes people slow to update their beliefs. In markets and policy, it can keep a bad decision going for a long time.
Example
An investor who is sure a stock will rise reads only positive news and analyst reports about the company and dismisses warnings as "noise". They hold on even as the evidence against the stock grows.
Don't confuse with
- Overconfidence bias: overrating one's own knowledge or forecasting skill. Confirmation bias is about filtering evidence to fit a belief, and the two often reinforce each other.
Related concepts
- Behavioural economics
- Bounded rationality
- Satisficing
- Heuristics
- Anchoring
- Availability heuristic
- Overconfidence bias
- Prospect theory
- Loss aversion
- Endowment effect