Daniel Kahneman in the context of Heuristics in judgment and decision making

Heuristics (from Ancient Greek εὑρίσκω (heurískō) 'to find, discover') is the process by which humans use mental shortcuts to arrive at decisions. Heuristics are simple strategies that humans, animals, organizations, and even machines use to quickly form judgments, make decisions, and find solutions to complex problems. Often this involves focusing on the most relevant aspects of a problem or situation to formulate a solution. While heuristic processes are used to find the answers and solutions that are most likely to work or be correct, they are not always right or the most accurate. Judgments and decisions based on heuristics are simply good enough to satisfy a pressing need in situations of uncertainty, where information is incomplete. In that sense they can differ from answers given by logic and probability.

The economist and cognitive psychologist Herbert A. Simon introduced the concept of heuristics in the 1950s, suggesting there were limitations to rational decision making. In the 1970s, psychologists Amos Tversky and Daniel Kahneman added to the field with their research on cognitive bias. It was their work that introduced specific heuristic models, a field which has only expanded since. While some argue that pure laziness is behind the heuristics process, this could just be a simplified explanation for why people don't act the way we expected them to. Other theories argue that it can be more accurate than decisions based on every known factor and consequence, such as the less-is-more effect.

Amos Nathan Tversky (Hebrew: עמוס טברסקי; March 16, 1937 – June 2, 1996) was an Israeli cognitive and mathematical psychologist and a key figure in the discovery of systematic human cognitive bias and handling of risk.

Much of his early work concerned the foundations of measurement. He was co-author of a three-volume treatise, Foundations of Measurement. His early work with Daniel Kahneman focused on the psychology of prediction and probability judgment; later they worked together to develop prospect theory, which aims to explain irrational human economic choices and is considered one of the seminal works of behavioral economics.

Edward Francis Diener (July 25, 1946 – April 27, 2021) was an American psychologist and author. Diener was a professor of psychology at the University of Utah and the University of Virginia, and Joseph R. Smiley Distinguished Professor Emeritus at the University of Illinois, as well as a senior scientist for the Gallup Organization. He is noted for his three decades of research on happiness, including work on temperament and personality influences on well-being, theories of well-being, income and well-being, cultural influences on well-being, and the measurement of well-being. As shown on Google Scholar as of April 2021, Diener's publications have been cited over 392,000 times.

For his fundamental research on the subject, Diener was nicknamed Dr. Happiness. Researchers he has worked with include Daniel Kahneman, Martin Seligman, and Shigehiro Oishi.

Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics.

Based on results from controlled studies, it describes how individuals assess their loss and gain perspectives in an asymmetric manner (see loss aversion). For example, for some individuals, the pain from losing $1,000 could only be compensated by the pleasure of earning $2,000. Thus, contrary to the expected utility theory (which models the decision that perfectly rational agents would make), prospect theory aims to describe the actual behavior of people.

Vernon Lomax Smith (born January 1, 1927) is an American economist who is currently a professor of economics and law at Chapman University. He was formerly the McLellan/Regent's Professor of Economics at the University of Arizona, a professor of economics and law at George Mason University, and a board member of the Mercatus Center. Along with Daniel Kahneman, Smith won the 2002 Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics and his work in the field of experimental economics, which helped establish "laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms."

Smith is the founder and president of the International Foundation for Research in Experimental Economics (IFREEE), a member of the Independent Institute’s board of advisors, and a senior fellow at the Cato Institute in Washington D.C. He was elected a Fellow of the Econometric Society in 1987, and was elected to the National Academy of Sciences in 1995. In 2004, Smith was awarded an honorary doctorate by the Universidad Francisco Marroquín, where the Vernon Smith Center for Experimental Economics Research is named for him. He was also a founding board member of the Center for Growth and Opportunity at Utah State University. As of 2023, Smith also sits on the advisory board of the Madden Center for Value Creation at Florida Atlantic University.

Thinking, Fast and Slow is a 2011 popular science book by the Israeli-American psychologist Daniel Kahneman. Its main thesis is a differentiation between two modes of thought: "System 1" is fast, instinctive and emotional; "System 2" is slower, more deliberative, and more logical.

The book delineates rational and non-rational motivations or triggers associated with each type of thinking process, and how they complement each other, starting with Kahneman's own research on loss aversion. From framing choices to people's tendency to replace a difficult question with one that is easy to answer, the book summarizes several decades of research to suggest that people have too much confidence in human judgement. Kahneman performed his own research, often in collaboration with the psychologist Amos Tversky, which enriched his experience to write the book. It covers different phases of his career: his early work concerning cognitive biases, his work on prospect theory and happiness, and with the Israel Defense Forces.

The anchoring effect is a psychological phenomenon in which an individual's judgments or decisions are influenced by a reference point or "anchor" which can be completely irrelevant.

The original description of the anchoring effect came from psychophysics. When judging stimuli along a continuum, it was noticed that the first and last stimuli were used to compare the other stimuli (this is also referred to as "end anchoring"). This concept was notably formalized in behavioral economics by Amos Tversky and Daniel Kahneman. In their seminal 1974 work, they described anchoring as a heuristic used to make estimates under uncertainty.