Psychological myopia refers to the tendency in decision makers to focus on information immediately related to their judgment and to ignore other, less prominent, pieces of information.
Because we, as human beings, often ignore pieces of information in decision-making processes, it makes us think short-sightedly. Were you aware of that? Hsee and colleagues (2013) have reviewed the literature on psychological myopia, and this post introduces some of the research findings.
For example, in times of economic inflation, people often overlook the economic impact of inflation, and instead they judge on the basis of nominal values. This means that people tend to think about $200 as $200 instead of its actual (i.e., adjusted) value in times of inflation.
For this reason, people ignore relevant background information (such as the impact of inflation), and instead they focus on the face value or the most prominent information (i.e. the $200). More specifically, this tendency is referred to as the money illusion.
In relation to psychological myopia, researchers have examined proxy versus fundamental attributes. A proxy attribute is the factor that the decision maker is most aware of.
The concentration of pollutants in the air is a proxy attribute for a more fundamental attribute, namely the health consequence of pollution to humans.
We tend to think in proxy attributes, but thinking in this way may lead to biased decision-making. It has been shown that people do not readily translate proxy attributes into fundamental attributes. One study found that:
“When players bargained over chips with different exchange rates, their perception of fairness was more focused on the distribution of the chips than the distribution of the final outcomes.” (Hsee et al., 2013, p. 2)
A second study found that most participants preferred a 20% chance to win $45 over a 25% chance to win $30. A third study found that consumers often judged on the basis of the characteristics of a store (e.g., number of available products) instead of the actual qualities of the product.
Finally, a study has documented that consumers tend to favour a high-ranking product in a low-ranking category instead of a low-ranking product in a high-ranking category, even though the quality of the product is the same.
In this example, people do not compare the product across all categories, and therefore, it also reflects the tendency to think short-sightedly.
All above-mentioned research findings reflect people’s tendency to think short-sightedly. Do you think short-sightedly? You are welcome to leave a comment about your experiences of psychological myopia.