Behavior econ TERMS

Question 1

Affect

Answer 1

Observable emotional response

Question 2

Affect Heuristic

Answer 2

Heuristic in which the emotion associated with a decision option impacts its likelihood of selection.

Question 3

Anchoring

Answer 3

Manipulation of choice options vis-à-vis a reference point (or option) so that their likelihood of selection is affected.

Question 4

Asymmetrically Dominated Choice

Answer 4

Heightened likelihood of choice option selection by adding one or more unattractive choice options. (See Decoy Effect.)

Question 5

Availability Bias

Answer 5

Change in the likelihood of a choice option related to the apparent availability of options and not related to the respondent’s own expectation of utility.

Question 6

Availability Heuristic

Answer 6

Decision shortcut in which the ability of the respondent to recall information about the choice options impacts their likelihood of selection.

Question 7

Bias

Answer 7

Change in the likelihood of a choice option being selected not related to the respondent’s own Utility Expectation Model.

Question 8

Behavioral Economics

Answer 8

Discipline that includes a psychological or sociological explanation of economic behavior.

Question 9

Bounded Rationality

Answer 9

Decision process strategy limited by human ability to process information proposed by Herbert Simon.

Question 10

BrandEmbraceSM

Answer 10

Behavioral Science Lab service that computes an index of 0–100, indicating the degree to which a brand satisfies that buyer’s Utility Expectation Model.

Question 11

Certainty/Possibility Effect

Answer 11

Likelihood of selection of choice options affected by the probability of gains or losses, determined not by the absolute value of the change, but by the degree of change relative to a base level. (See Saliency, Prospect Theory and Zero Price Effect.)

Question 12

Choice Architecture

Answer 12

Effect on the likelihood of choice option selection from a decision heuristic driven by a large number of decision options.

Question 13

Cognitive Bias

Answer 13

Assessment of the selection of a decision option not conforming to norms, formal logic or external “rules.” (See Availability Bias, Representativeness, Optimism Bias and Confirmation Bias.)

Question 14

Commitment

Answer 14

Explicit or implicit agreement, with or without consequences, to the acceptance of a future behavioral change.

Question 15

Confirmation Bias

Answer 15

Effect on the likelihood of current choice option selections that confirm the utility of past decision option selections.

Question 16

Decision Fatigue

Answer 16

Impact of multiple and/or complex decision tasks on the heightened likelihood of using a heuristic.

Question 17

Decision ElementsSM

Answer 17

Mental constructs that serve as components of the Utility Expectation Model on which decision options are evaluated. To date, we have found that there are no more than nine and no fewer than six such Elements. They “appear” at the time of the purchase decision and may not be “available” to the buyer outside of that context. They are neither demographic nor psychographic in nature, but are related to the functional, emotional and social consequences of purchase. Decision Elements may be at different levels of saliency to the buyer and may be perceived and used differently

Question 18

Decision Element GatesSM

Answer 18

Components of the Utility Expectation Model, these are mental “rules” that specify how decision alternatives are evaluated against each element for each buyer. For example, an element relating to social responsibility will have different definitions and uses for different buyers.

Question 19

Decision Gate BlueprintsSM

Answer 19

Components of the Utility Expectation Model, these are mental strategies that specify how the Element Gates are used in a decision. They persist over time; our longest longitudinal study of 14 months confirmed the same Blueprints in use. For this reason we believe that Blueprints are mental templates, much like muscle memory but for the mind. Interestingly, there appears to be a finite number of Blueprints in each product category. Looking across all of the all product categories evaluated to date, the majority of buyers can be described with roughly half the number of Blueprints as there are Elements in their Blueprint, making the purchase decision processes of most buyers in a category describable with only three or four Blueprints.

Question 20

Decoy Effect

Answer 20

Heightened likelihood of choice option selection by adding one or more unattractive/unappealing choice options. (See Asymmetrically Dominated Choice

Question 21

Defaults

Answer 21

Heightened likelihood of choice option selection by adding one or more unattractive/unappealing choice options. (See Asymmetrically Dominated Choice.)

Question 22

Defaults

Answer 22

Choice options “automatically” selected in the absence of a choice option selected by the respondent. (See Choice Architectureand Inertia.)

Question 23

Discounted Utility (DU)

Answer 23

Utility of some future event or possession calculated as a reduction (discount) from its present value.

Question 24

Discounting

Answer 24

Reduction in the utility of choice options below their apparent utility. (See Choice Architecture and Time Discounting.)

Question 25

Diversification Bias

Answer 25

Likelihood of selecting more choice options than are needed or useful. (See Projection Bias.)

Question 26

(See Projection Bias.)

Dual-system Decision Theory

Answer 26

Model of decision making that suggests two processes, System/Type 1 being faster, more “automatic” and less dependent on a cognitive heuristic; System/Type 2 process is slower, more complex and cognitive and used for more important/riskier choice options.

Question 27

Empathy Gap (Hot-Cold/Positive-Negative)

Answer 27

Impact of a prior emotional state on the likelihood of selecting choice options and appears most pronounced when the difference (gap) in the pre- versus post- (choice) state is maximized.

Question 28

Endowment Effect/Bias

Answer 28

Effect of the apparent overvaluing of a possession, including a relationship. (See Loss Aversion, Inertia and Status Quo Bias.)

Question 29

Expectancy Theory

Answer 29

First proposed by Victor H. Vroom, this conceptual model suggests that the selection of behavioral choice options are directed by their anticipated consequences.

Question 30

Framing Effect

Answer 30

Impact on the likelihood of choice option selection associated with the method of or context within which options are presented. For example, risky choice framing would be represented by presenting the identical likelihood of winning but in terms of both winning and losing (i.e., the likelihood of winning is 30 out of 100 cases, but the likelihood of losing is 70 out of 100 cases).

Question 31

Game Theory

Answer 31

Study of strategy, tactics (decisions), risks, rewards and the effect of learning in the playing a game.

Question 32

Study of strategy, tactics (decisions), risks, rewards and the effect of learning in the playing a game.

Answer 32

Heuristic characterized by apparent “automatic” decision making and rigid conformity to the respondent’s Utility ExpectationModel.

Question 33

Halo Effect

Answer 33

Diffusion of the perception of one characteristic of a person or thing to other characteristics of the same person or thing. For example, an attractive political candidate may also be considered warm and friendly.

Question 34

Hedonic Adaptation/Treadmill

Answer 34

Belief that happiness/contentment reaches a stable and entropic level over time in spite of positive or negative emotional “ups” and “downs.” This steady-state level of happiness forms the basis by which the impact of upward or downward shifts are perceived.

Question 35

Herd Behavior/Effect

Answer 35

Impact on decisions caused by participating in behavior and/or beliefs shared by a large number of others.

Question 36

Heuristic

Answer 36

Mental decision-making shortcut often associated with a particular goal or purpose such as “price sensitive,” “brand loyal” and “discount driven.”

Question 37

Hindsight Bias

Answer 37

Effect (‘knew it all along” effect) occurring when a rationale for a prior decision or conclusion is used to explain a current decision or conclusion. This may include the incorrect recollection of the circumstances of the prior decision or conclusion and/or the belief that the new decision or conclusion was the same or “predictable.”

Question 38

Inequity Aversion

Answer 38

Social approbation against participating in decisions that result in unequal distributions of wealth, value or prestige.

Question 39

Inertia

Answer 39

Stable state associated with little change in beliefs, behavior, commitments, relationships or decisions.

Question 40

Intertemporal Choice

Answer 40

Study of the impact of different periods of time in the future on the likelihood of selecting choice alternatives differing in risk, payoff or likelihood of occurrence. In most cases, the likelihood of selecting a positive outcome is higher the sooner it occurs in the future. (See Present Bias.)

Question 41

Licensing/Self-licensing Effect

Answer 41

Higher likelihood of selecting a choice option considered “bad” or immoral, after selecting an option considered “good” or moral.

Question 42

Loss Aversion

Answer 42

Higher likelihood of selecting a choice option that avoids a loss of the same magnitude as an alternative that promises a gain. Often called the “losses loom larger than gains” phenomenon first reported by Kahneman and Tversky and used to explain the Endowment Effect.

Question 43

Mental Accounting

Answer 43

Finding that the value of money differs depending on its origin and intended use, contrary to the concept of Fungibility, which states the opposite.

Question 44

MINDGUIDESM

Answer 44

Behavioral Science Lab service that generates the Utility Expectation ModelSM, Decision ElementsSM, Decision Element GatesSMand Decision Gate BlueprintsSM.

Question 45

Optimism Bias/Effect

Answer 45

Finding that choice options with positive, higher utility outcomes will be perceived as more likely to occur than those with negative consequences.

Question 46

Overconfidence Bias/Effect

Answer 46

Finding that an individual’s subjective assessment of their performance exceeds their objective performance.

Question 47

Planning Fallacy

Answer 47

Finding that an individual’s estimate of the length of time it will take to complete a task is always shorter than the actual time required.

Question 48

Peak-end Rule

Answer 48

Refers to findings that the pleasantness or unpleasantness of past experiences are more related to peaks, valleys and the ends of experiences.

Question 49

Preference(s)

Answer 49

Desired choice alternatives, ordered on the basis of utility.

Question 50

Present Bias/Effect

Answer 50

Higher likelihood of selecting choice options whose payoffs are nearer in time to the immediate present.

Question 51

Priming/Creating a Psychological “Set”

Answer 51

Act of influencing subsequent tasks/measurements by inserting prior material overtly or subliminally.

Question 52

Projection Bias/Effect

Answer 52

In behavioral economics, the degree to which one’s preferences, attitudes, beliefs and interests are believed to remain the same in the future.

In psychology, the degree to which others’ preferences, attitudes, beliefs and interests are believed to coincide with one’s own.

Question 53

Prospect Theory

Answer 53

Model that describes the likelihoods of selecting choice options that differ in risk, probability of occurence and payoff. Some individuals may be more risk averse in order to be more loss averse, while others may be less risk averse to achieve a larger payoff.

Question 54

Reciprocity

Answer 54

Social norm suggesting that the nature of interpersonal interaction is best explained as a system of exchanges of like kinds, i.e. the most likely response to a social exchange is one that is similar or equivalent to the one that stimulated it, either positive and negative. This is the notion of “Equivalent Action.”

Question 55

Representativeness Heuristic/Bias

Answer 55

This decision shortcut technique suggests that decision options will be compared against alternatives whose utilities are known and that the degree of “fit” with these alternatives will impact the decision. This is similar to the proposed method of operation of the Utility Expectation Model.

Question 56

Risk as Feelings Theory

Answer 56

This systems model of behavior suggests that the anticipated (expected) utility of a decision is impacted by its emotional consequences, often related to the risk of the outcome. In this way, it is similar to the Utility Expectation Model in associating a utility with the expected emotional consequences of a decision.

Question 57

Saliency

Answer 57

Degree to which a Decision Element plays a role in the decision process. MINDGUIDESM surfaces low saliency but active Decision Elements through its proprietary data collection processes.

Question 58

Social Norm

Answer 58

Accepted and appropriate rules of behavior for a group.

Question 59

Social Proof

Answer 59

Influence of others to conform behaviorally

Question 60

Standard Economic Model

Answer 60

Expression of economic behavior with no reference to psychological or sociological concepts

Question 61

Status Quo Bias/Effect

Answer 61

Increased likelihood of making the same (or similar) decisions in the future as were made in the past.

Question 62

Sunk Cost Fallacy/Bias/Effect

Answer 62

Increased likelihood of deciding to continue a course of action due to the level of previously invested resources regardless of expected outcome.

Question 63

Time/Temporal Discounting

Answer 63

Increased likelihood of selection of decision options whose positive consequences occur at an earlier date in the future, i.e., closer to the immediate present. This effect diminishes as the reward/utility alternatives occur further out in the future.

Question 64

Utility

Answer 64

Benefits (satisfaction, happiness and/or well-being) derived from a good or service. Utility Expectation Model describes the template against which decision options are evaluated.

Question 65

Utility Expectation Model

Answer 65

Computational model based on Expectancy Theory whose output is the expected utility values of purchase decision alternatives constructed on the basis of Decision ElementsSM, Decision Element GatesSM, and Decision Gate BlueprintsSM

Question 66

Zero Price Effect

Answer 66

Relationship between the utility of products and services with zero price (free) and those with a non-zero price. Demand will usually be greatest for a zero (free) price option within a set of options with equal price reductions.