behavioural economics' Flashcards
What is assumed about the ‘economic man’
rational,intelligent and emotionless
What is ‘bounded rationality’
Consumers do not have sufficient information
What is ‘bounded rationality’
Consumers do not have sufficient information
What is ‘Heuristics’
mental shortcuts for optimal, not perfected, decisions
What are default choices (habitual nature)
repeat behaviour as they require little cognitive behavious
What are choice architecture
describes how the decisions we make are affected by the layout / sequencing / range of choices that are available
What are is an example influenced by social norms
Social norms about ‘giving’
What is Herd Behaviour
Making decisions based in part on who is around us and the choices they make e.g. financial markets, items off a menu in restaurant
What is Anchoring
Value set by mental reference points e.g. 2.00 wings meal
What is Priming
Our behaviour by cues that work subconsioucsly and prime us to behave in certain waves
e.g. playing of certain types of music in a shopping mall
What is framing
framing a question or offering in a different way
What is asymmetric framing
including an obviously inferior 3rd choice or a hyper-expensive 3rd option rather than a simple expensive/cheap option that can guide consumers to more expensively priced items
Availability Bias
distortion that arises from the use of information which is most readily available
e.g. over estimate likelihood of an air crash based on recent headlines
What is the Commitment effect
The more public our position, the less willing we are to change it
What is bounded self control
- People frequently lack the self-control to act in a manner that they claim is in their own best interest.
For example, the recently introduced Workplace Pension Scheme automatically enrols workers in the scheme but allows people to opt out if they wish. The take-up of such schemes is far greater than if people were required to opt in.