Alternate Views of Consumer Behaviour Flashcards
Assumptions of rational behaviour
Agents choose independently of one another
An agent has fixed and stable tastes and preferences
An agent gathers complete information on all alternatives
An agent always makes an optimal choice with given preferences
Reasons why economic agents might not act in a rational way
Have limited capacity to calculate all costs and benefits (bounded rationality)
Heavily influenced
Act reciprocally rather than in pure self interest
Lack self control and seek immediate satisfaction (bounded control)
They are loss averse
They’d rather satisfy than maximise
What is anchoring
When agents are influenced in an exaggerated way by the first piece of information received
What is endowment effect
When we value things that we own more than the things we don’t
What is framing
When a decision is based on how information and data is presented to us
