Behavioral Economics

Question 1

Propensity to do nothing.

Preference towards inertia and the status quo.

Answer 1

ACTION BIAS

Question 2

Reliance on good or bad feelings experienced in relation to a stimulus.

Answer 2

AFFECT HEURISTIC

Question 3

Form of PRIMING whereby the initial exposure to a number serves as a reference point to influence subsequent decisions.

Answer 3

ANCHORING

Question 4

Practice of influencing choice by organizing the context in which people make decisions.

Answer 4

CHOICE ARCHITECTURE

Question 5

Phenomenon occurs as a result of of too many choices being available.

Associated with unhappiness and DECISION FATIGUE.

Answer 5

CHOICE OVERLOAD

Question 6

Systemic (non-random) error in thinking.

Judgment deviates from accepted formal logic.

Answer 6

COGNITIVE BIAS

Question 7

Seeking out information that fits a preconception.

Answer 7

CONFIRMATION BIAS

Question 8

Long sessions of decision making can lead to poor choices due to diminished executive function.

Answer 8

DECISION FATIGUE

Question 9

Phenomenon occurs when a preference for one option over another changes as a result of adding a third similar, but less attractive, option.

Answer 9

DECOY EFFECT

Question 10

In a market with perfectly rational agents, the price (market value) of an item reflects its true worth (intrinsic value).

Answer 10

EFFICIENT MARKET HYPOTHESIS

Question 11

Tasks requiring persistent self control can weaken the ego, resulting in a diminished ability to self regulate behavior.

Answer 11

EGO DEPLETION

Question 12

Bias in overvaluing what we own in spite of the objective market value.

Answer 12

ENDOWMENT EFFECT

Question 13

Mistaken belief that independent events are interrelated.

Eg. roulette player betting on a pattern that has previously occurred)

Answer 13

GAMBLER’S FALLACY

Question 14

Global evaluation of a person influences perception of the person’s unrelated attributes.

Eg. friendly person considered physically attractive.

Answer 14

HALO EFFECT

Question 15

Getting used to changes in life experiences.

Eg. Happiness from a new salary will wane over time.

HEDONIC: Relating to pleasant/unpleasant sensations.

Answer 15

HEDONIC ADAPTATION

Question 16

Doing what others do instead of exercising independent judgment.

Groupthink.

Answer 16

HERD BEHAVIOR

Question 17

Cognitive shortcuts to simplify decisions under conditions of uncertainty.

Resolution though trial and error.

Answer 17

HEURISTIC

Question 18

New information changes recollections to something different.

Leads to distorted judgment about the probability of future events.

Answer 18

HINDSIGHT BIAS

Question 19

Choice not to obtain information that is freely available.

Answer 19

INFORMATION AVOIDANCE

Question 20

The pain of losing is psychologically twice as powerful as the pleasure of gaining.

Answer 20

LOSS AVERSION BIAS

Question 21

Distorted sense of consumption.

Answer 21

MINDLESS EATING

Question 22

Tendency to overestimate the probability of positive events and underestimate the probability of negative events.

Answer 22

OPTIMISM BIAS

Question 23

Person’s subject confidence in their ability exceeds their objective performance.

Answer 23

OVERCONFIDENCE EFFECT

Question 24

Rate of consumption is decreased by dividing resources into smaller units.

Eg. Cookies wrapped individually.

Answer 24

PARTITIONING

Question 25

Assumption that one’s preferences will remain the same over time.

Answer 25

PROJECTION BIAS

Question 26

Present rewards are weighted more heavily than future ones.

Answer 26

TIME (TEMPORAL) DISCOUNTING

Question 27

Traditional cost-benefit models cannot account for the psychological effect of getting something for free.

Answer 27

ZERO PRICE EFFECT