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Cognitive Biases

What is Home Bias?

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Home bias is a preference for things from your own country. For example, people may believe that domestic products are higher quality than imports. This can happen even when a country doesn't have a particularly strong international reputation for quality in a particular area.


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
Decision Bias
A preference for things from your home country.
Related Concepts
Next: Us vs Them
More cognitive biases:
Ambiguity Effect
Backfire Effect
Base Rate
Circular Reasoning
Cognitive Bias
Cognitive Dissonance
Complexity Bias
Crab Mentality
Creeping Normality
Curse Of Knowledge
Decoy Effect
Exposure Effect
False Analogy
False Hope
Fear Of Youth
Gambler's Fallacy
Golden Hammer
Halo Effect
Hindsight Bias
Negativity Bias
Optimism Bias
Peak-End Rule
Positive Bias
Sour Grapes
Survivorship Bias
Us vs Them
Victim Mentality
Wishful Thinking
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