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Behavioral Economics > Behaviotal Econ > Flashcards

Behaviotal Econ Flashcards

1
Q

What is behavioral economics?

A

Behavioral economics is the study of how psychological factors influence economic decision-making.

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2
Q

True or False: Behavioral economics assumes that individuals always make rational decisions.

A

False

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3
Q

What concept explains the tendency for people to prefer avoiding losses over acquiring equivalent gains?

A

Loss aversion

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4
Q

Fill in the blank: The theory that individuals make decisions based on perceived gains and losses rather than final outcomes is known as _____ theory.

A

Prospect

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5
Q

What is the ‘endowment effect’?

A

The endowment effect is the phenomenon where people assign more value to things merely because they own them.

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6
Q

Which term describes the mental shortcuts or rules of thumb that simplify decision-making?

A

Heuristics

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7
Q

What is ‘anchoring’ in behavioral economics?

A

Anchoring is the cognitive bias where individuals rely heavily on the first piece of information encountered when making decisions.

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8
Q

True or False: The availability heuristic leads individuals to base their decisions on information that is readily available in memory.

A

True

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9
Q

What does the term ‘bounded rationality’ refer to?

A

Bounded rationality refers to the idea that individuals are limited in their decision-making capabilities due to cognitive limitations and time constraints.

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10
Q

What is the ‘status quo bias’?

A

Status quo bias is the preference for the current state of affairs, leading individuals to resist change.

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11
Q

Which behavioral economic principle involves making decisions based on the way choices are framed?

A

Framing effect

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12
Q

What is ‘hyperbolic discounting’?

A

Hyperbolic discounting is the tendency to favor smaller, immediate rewards over larger, delayed rewards.

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13
Q

Fill in the blank: _____ is the phenomenon where people feel more satisfied with a decision if they have multiple options available.

A

Choice overload

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14
Q

What does ‘sunk cost fallacy’ refer to?

A

The sunk cost fallacy is the tendency to continue an endeavor once an investment in money, effort, or time has been made, regardless of future outcomes.

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15
Q

True or False: Social norms have no impact on economic decision-making.

A

False

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16
Q

What is the ‘bandwagon effect’?

A

The bandwagon effect is the phenomenon where individuals adopt certain behaviors or beliefs because they perceive that others are doing the same.

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17
Q

What role does ‘mental accounting’ play in behavioral economics?

A

Mental accounting refers to the tendency of individuals to categorize and treat money differently based on its source or intended use.

18
Q

What is the ‘decoy effect’?

A

The decoy effect is when the presence of a third option influences the choice between two other options.

19
Q

Fill in the blank: The concept of _____ refers to the tendency for people to overestimate the probability of events based on how easily examples come to mind.

A

Availability heuristic

20
Q

What is ‘temporal discounting’?

A

Temporal discounting is the devaluation of future rewards compared to immediate rewards.

21
Q

True or False: Behavioral economics can be applied to understand consumer behavior.

A

True

22
Q

What does ‘loss aversion’ imply about consumer behavior?

A

Loss aversion implies that consumers are more sensitive to losses than to gains, often leading to risk-averse behavior.

23
Q

What is ‘cognitive dissonance’?

A

Cognitive dissonance is the mental discomfort experienced when holding two or more contradictory beliefs or values.

24
Q

Which theory suggests that people evaluate potential losses and gains differently?

A

Prospect theory

25
Q

What is the ‘illusion of control’?

A

The illusion of control is the tendency for people to believe they can influence outcomes that they clearly cannot.

26
Q

Fill in the blank: The _____ effect occurs when people perceive a higher value for a product simply because it is more expensive.

A

Veblen

27
Q

What is the difference between intrinsic and extrinsic motivation?

A

Intrinsic motivation comes from within the individual, while extrinsic motivation is driven by external rewards or pressures.

28
Q

True or False: Behavioral economics only focuses on individual decision-making.

A

False

29
Q

What role do emotions play in economic decision-making according to behavioral economics?

A

Emotions can significantly influence decision-making, often leading to irrational choices.

30
Q

What is the ‘self-serving bias’?

A

The self-serving bias is the tendency to attribute positive outcomes to oneself and negative outcomes to external factors.

31
Q

Fill in the blank: _____ refers to the tendency to favor information that confirms existing beliefs.

A

Confirmation bias

32
Q

What is ‘overconfidence bias’?

A

Overconfidence bias is the tendency for individuals to overestimate their own abilities or knowledge.

33
Q

Which concept explains why people may refuse to sell a stock even when its value drops?

A

Loss aversion

34
Q

True or False: Behavioral economics incorporates insights from psychology into economic theory.

A

True

35
Q

What is ‘nudge theory’?

A

Nudge theory suggests that indirect suggestions can influence the motives and incentives of individuals, guiding them toward beneficial behaviors.

36
Q

What is the ‘certainty effect’?

A

The certainty effect is the tendency for individuals to favor outcomes that are certain over those that are merely probable.

37
Q

Fill in the blank: The _____ principle states that people are more likely to comply with a request if they perceive it as consistent with their self-image.

A

Consistency

38
Q

What does ‘behavioral nudging’ aim to do?

A

Behavioral nudging aims to encourage individuals to make better choices without restricting their freedom of choice.

39
Q

True or False: Behavioral economics has no relevance to public policy.

A

False

40
Q

What is ‘social proof’?

A

Social proof is the phenomenon where individuals look to the behavior of others to help guide their own actions.

Behavioral Economics (1 decks)

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