Ignorance is Bliss: A Study on How and Why Humans Depend on Recognition Heuristics in Social Relationships, the Equity Markets and the Brand Market-Place, Thereby Making Successful Decisions

23 Pages Posted: 13 Jan 2005

See all articles by Karan Khemani

Karan Khemani

London School of Economics - Departments of Operational Research and Finance

Date Written: December 1, 2005

Abstract

A concise look in three unrelated, yet complex environments reveals a strong human dependence on the recognition heuristic. Its marketability to the mind as a good decision making tool (over other complex approaches), is shown to be almost innate and ultimately successful. The three environments, social relationships, equity markets and the brand market place, all bombard the human with a myriad of data and information. Usage of the recognition heuristic is a form of filtering, an efficient means of making a successful decision within limited resources.

Keywords: Heuristics,Recognition,recognition heuristics,portfolio construction,brand heuristics,affect,bounded rationality,ecological rationality,social relationships,decision theory,multi-attribute choice,expected utility,equity valuation models,sharpe ratio,high return strategy

JEL Classification: G10, G11, G12, C11, C44, D4

Suggested Citation

Khemani, Karan, Ignorance is Bliss: A Study on How and Why Humans Depend on Recognition Heuristics in Social Relationships, the Equity Markets and the Brand Market-Place, Thereby Making Successful Decisions (December 1, 2005). Available at SSRN: https://ssrn.com/abstract=647666 or http://dx.doi.org/10.2139/ssrn.647666

Karan Khemani (Contact Author)

London School of Economics - Departments of Operational Research and Finance ( email )

Houghton Street
London, England WC2A 2AE
United Kingdom

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