Availability Heuristic: An Overview and Applications

Abstract

Heuristics exist in all individuals, causing irrational and often false conclusions on the frequency and probability of events. With the recognition of behavioral finance theories, this essay includes an overview, applications, and analysis of a particular heuristic, the availability heuristic. It focuses on the potential misjudgment that may result from the availability heuristic, in order to provide an alternative perspective for economic and social issues. This essay may build a better understanding of the availability heuristic for market participants and policymakers; reducing the degree and frequency of misjudgment and human errors in influential decision-making processes.