Overview
Home bias often comes up as a problem in economics. Economic models tend to assume that people are rational agents. As such, phenomena such as home bias can break economic models. People tend to invest in domestic companies when economic models would predict that they would diversity internationally. Companies tend to trade more with domestic partners, even when free trade agreements allow them to pick partners from abroad.People trust what they know. Culture, language and patriotism also play a strong role in economic decisions. This isn't necessarily illogical. Nevertheless, home bias may lead to decisions that are suboptimal such as investment losses due to a lack of international diversification.| Overview: Home Bias | ||
Type | Decision Bias | |
Definition | A preference for things from your home country. | |
Related Concepts | Cold LogicInvestingCognitive BiasesEconomics | |
