2- Economic Decision Making

Question 1

What is Behavioural Economics?

Answer 1

A field of study which focuses on insights of psychologists who want to understand human behaviour.

Question 2

What does bounded rationality state?

Answer 2

No matter how clever individuals are, there are three factors which hold them back.

Question 3

What are these three factors?

Answer 3

Imperfect Information on alternatives, limited mental processing ability, time constraints.

Question 4

What does bounded self control state?

Answer 4

Due to limited self control, some people may start out with good intentions, but slip into less rational behaviours, as they see more appealing alternatives.

Question 5

What is an example of bounded self control?

Answer 5

A healthy eating regime turning into fast food.

Question 6

What are the Biases in Decision making?

Answer 6

Rule of Thumb, Availability Bias, Anchoring, Social Norms, Altruism.

Question 7

What is the rule of thumb?

Answer 7

Short cuts in decision making used by humans to help make sensible decisions based on the limited information they have.

Question 8

What is Availability Bias?

Answer 8

Occurs when individuals place too much weight on the probability of an event happening, as they can recall examples of similar events.

Question 9

What is an example of availability bias?

Answer 9

An individual reading about an event, then thinking it’s more likely to happen to them.

Question 10

What did a recent study about UK opinions on immigrants find?

Answer 10

UK citizens believed 24% of the UK population were immigrants, when it’s actually 13%.

Question 11

What is Anchoring?

Answer 11

The idea that most people have a tendency to compare and contrast a limited set of items.

Question 12

What is an example of anchoring?

Answer 12

Choosing the middle option in price on restaurant menus.

Question 13

What are social norms?

Answer 13

Unconsciously learning from the behaviour of other people.

Question 14

What is an example of a social norm?

Answer 14

Attitudes towards drinking in young people, as well as smoking, are influenced by social norms.

Question 15

How were opinions on smoking changed?

Answer 15

Health campaigns and a ban on smoking indoors.

Question 16

What is Altruism?

Answer 16

Acting to promote someone else’s well being, even when we suffer as a consequence.

Question 17

What is an example of Altruism?

Answer 17

Most people’s first impulse is to co-operate with each other, not compete.

Question 18

What is Choice Architecture?

Answer 18

Sets out how government can guide people into making better choices, and the impact that presentation has on consumer decision making.

Question 19

What are the different types of choice architecture?

Answer 19

Default Choice, Mandated Choice, Restricted Choice.

Question 20

What is default choice?

Answer 20

One option is automatically selected, unless an alternative is specified.

Question 21

What is an example of default choice?

Answer 21

Opt out organ donation, rather than opt in.

Question 22

What is mandated choice?

Answer 22

People are required to make a decision, sometimes by law, and there is no default option.

Question 23

What is an example of mandated choice?

Answer 23

Microsoft software installation.

Question 24

What is restricted choice?

Answer 24

Offering people a limited number of options, on the basis that offering too many choices is unhelpful.

Question 25

What is an example of restricted choice?

Answer 25

Personalised letters for appointments.

Question 26

What is Framing?

Answer 26

The tendency for people to be influenced by the context in which the choice is presented.

Question 27

What is an example of framing?

Answer 27

The wording of the question in a referendum.

Question 28

What is a nudge?

Answer 28

A nudge tries to alter people’s behaviour in a predictable way without forbidding options.

Question 29

What are the key aspects of nudges?

Answer 29

Provide information for people to respond to, create positive social norms, opt out schemes rather than opt in, active choosing by individuals.

Question 30

What are the key aspects of shoves?

Answer 30

Use taxation and subsidies to alter incentives and punish people, uses fines, bans activities, and regulation.

Question 31

What are the four key behavioural insights?

Answer 31

Easy, Attractive, Social, Timely.

Question 32

What are the examples of Behavioural Insight in government?

Answer 32

Putting a picture of an unregistered vehicle in a letter to an owner of a vehicle. Sending personalised text messages to people with outstanding fines, emotional wording in campaigns, encouraging charitable donations in wills.