4.1.2.4 Behavioural economics & economic policy Flashcards
What is choice architecture?
Describes how decisions are affected by the design/ sequencing/ range of choices
available e.g. Restaurants have salad bars at the front
When is choice architecture most effective?
It is often most effective when it encourages simplicity in the decisions that people must make and
in which the benefits and costs are made clear.
What is framing?
Refers to how decisions are influenced as a result of how information is presented and organised.
i.e. We may react in different ways and make different choices if the same information is simply presented in a different way e.g. Presumed consent for human organ donations to increase the supply of organs
What is asymmetric framing?
Involves including an obviously inferior 3rd choice or a hyper-expensive 3rd option rather
than a simple expensive/cheap choice can guide consumers to more expensively-priced
items
What is default choices?
Default choices are selected when no action is taken.
What is restricted choices?
Occurs due to bounded rationality, where too many choices can lead to stress and indecision, making limiting choices a way to improve efficiency.
What is mandated choices?
Choices that require individuals to decide in advance, often for public policy decisions like organ donation
What’s a nudge?
A way to manipulate people’s choices to lead them to make specific decisions
Give an example of how choice architects use nudges?
Examples include lotteries for weight loss encouragement and using checklists in hospitals.
What are evaluations of Nudge theory?
- There are clear limits to the application of nudge theory - Conventional policy interventions such as taxes, subsidies and regulations are often just as effective as nudges -Focuses too heavily on people’s vulnerability to fall for fallacies and their psychological biases
