availability heuristic

Syllable breakdown

Dictionary meaning

a mental shortcut in which people estimate the frequency or probability of events based on how easily examples come to mind — how available they are to mental retrieval — rather than by systematic analysis of objective base rates; events that are vivid, recent, dramatic, or personally experienced are easier to bring to mind and are therefore judged to be more probable than events that are statistically more common but less memorable; in financial contexts the availability heuristic causes investors to overestimate the risk of dramatic market crashes after recent downturns — such as the 2008 financial crisis — because the vivid memory makes such events feel highly probable; media coverage of lottery winners increases ticket sales because wins are easily available to the imagination despite the minuscule objective probability; after airline disasters, flight bookings fall and car travel increases despite the fact that driving is statistically far more dangerous than flying, demonstrating availability-driven probability misestimation

Examples

• Following the 9/11 attacks, the availability heuristic caused many investors to dramatically underweight US equities based on vivid recent memories of systemic risk.
• Insurance sales for earthquake coverage spike immediately after major earthquakes because the risk is highly available in consumers' minds.