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Cognitive biases (incl. the Snake Bite Effect)
...are tendencies to think in certain ways that can lead to systematic deviations from a standard of rationality or good judgment, and are often studied in psychology and behavioral economics (behavioral finance).
Although the reality of these biases is confirmed by replicable research, there are often controversies about how to classify these biases or how to explain them. Some are effects of information-processing rules (i.e. mental shortcuts), called heuristics, that the brain uses to produce decisions or judgments. Such effects are called cognitive biases. Biases in judgment or decision-making can also result from motivation, such as when beliefs are distorted by wishful thinking. Some biases have a variety of cognitive ("cold") or motivational ("hot") explanations. Both effects can be present at the same time.
There are also controversies as to whether some of these biases count as truly irrational or whether they result in useful attitudes or behavior. For example, when getting to know others, people tend to ask leading questions which seem biased towards confirming their assumptions about the person. This kind of confirmation bias has been argued to be an example of social skill: a way to establish a connection with the other person.
The research on these biases overwhelmingly involves human subjects. However, some of the findings have appeared in non-human animals as well. For example, hyperbolic discounting has also been observed in rats, pigeons, and monkeys.
Following a selection of common biases, a more exhaustive list of biases can be found on wikipedia/here: https://en.wikipedia.org/wiki/List_of_cognitive_biases
source: http://techreviewpanarab.com
Short recap on the term "Behavioral finance": Behavioral finance is a booming business that is being applied in industries beyond just financial institutions. Governments use it to entice citizens to save more for retirement; fitness applications use it to encourage users to train more, sometimes stirring up their competitive juices by pitting users against their friends.
But despite the development of this field of study, with fear and greed still a common human trait, it seems that irrational financial behaviors are here to stay.
sources for original text paras: http://techreviewpanarab.com, https://en.wikipedia.org
