System 1 and 2 thinking

System One Thinking Everyday that we wake up we use system 1 and system 2 thinking just to get our day started. There are clear differences between the two types of thinking and when we are dealing with system 1 by itself we tend to be dealing with situations where we need to be fast and quick on our feet to come up the answers or reactions that we need. System 1 is defined as “operates automatically and quickly, with little or no effort and no sense of voluntary control” (Kahneman, 2008). So when I think of system one thinking I think of everyday task that I do to get myself through the day, for an example when I am brushing my teeth I don’t have to think very hard and long about where I need to put the toothpaste or how to brush my teeth. When we are dealing with anchoring heuristics and system 1 thinking there are many situations that I can think of where anchoring heuristics may raise some biases when we are using system 1. One heuristic that I can think of is when you are looking to buy a used car from a dealership they have a price set and when you look at the price they are asking you automatically come back with a counter offer. Here we are using system 1 because we don’t have to sit and think very long about the price we want to pay, a lot of times people already have the price in mind for what they want to pay before they even get to the dealership. With anchoring heuristics come cognitive biases, even if it’s not on your end. What cognitive biases are in the situation described above about the used car, would be the person who is trying to sell you the car for the price that they want because the car has a special accommodation that no other model would be able to offer you. Once the anchor is set (the price of the car) this is when we start to see all these different biases come into play. When dealing with an anchor it is hard to figure out what they actually mean by anchor, the anchor is a “reference point” or starting price. If we

Bibliography: Kahneman. (2002, Jan 4). Availability Heuristics. Retrieved Oct 21, 2013, from Heuristics: http://heuristics.behaviouralfinance.net/availability/ Kahneman. (2008). The Characters of the Story. Kahneman Chapter 1 , 19-30.