ABSTRACT
This chapter describes biases in the cognitive system. It provides some insights from the field of cognitive psychology on understanding the way people think and learn. It explores some common habits of thinking and flawed beliefs that can lead to everyday biased thinking and diminished well-being. The chapter provides an understanding of how people act under conditions of incomplete information, and vulnerability to errors. It describes several mental shortcomings that contribute to learning traps and decision biases. People learn and respond through two systems: the intuitive system- without awareness, and the cognitive system. Implicit learning underlies habituation and classical conditioning. Working memory is widely thought to be one of the most important mental faculties, critical for the cognitive system. Unrealistic optimism can explain a lot of individual risk-taking behavior. Utility refers to how desirable a task or choice is for an individual. There are four types of utility involved in decisions: decision utility, experienced utility, predicted utility, and remembered utility.
