A Literature Review on Availability Heuristic Implicated in Different Fields

Abstract

Decision-makers involved in economic activities are faced with the constraints of a complex environment and with the limitations of their cognitive ability. In other words, people are bounded rational. Therefore, psychological factors affect people's judgments and decisions under uncertainty, including the availability heuristic. The availability heuristic refers to that people judge the probability of event according to the ease of recalling the instances. It was first proposed by Tversky and Kahneman, and is an ecological cue that people often use in making decisions. Although the availability heuristic has received a lot of attention, there is still a lack of systematic research literature on the mechanism of availability heuristic and its application in real life. This essay aims to investigate the origin and definition of availability heuristic, and then identify the underlying mechanism as well as the determinants of the availability heuristic to explain how the availability heuristic is applied in the cooperation relationship, financial markets and consumer behavior in real world.