behavioural economics

Question 1

demand , elasticity of demand

Answer 1

demand: the reward value for a certain substance

elastic= demand decreases when the prices increase

inelastic= demand does not change in response to the price.

Question 2

unit price

Answer 2

price for one unit of a certain article.

Question 3

opportunity cost

Answer 3

the resource or energy cost for behaving in a certain way.

Question 4

discounting

Answer 4

delay discounting: excessive preference for an immediate reward, despite the long term disadvantages which are a consequence of investing in the current behaviour.

hyperbolic discount model: describes the effect of delayed discounting.

Question 5

bounded rationality

Answer 5

according to the classical economic theory humans are rational beings which make decisions based on the optimal

Bounded rationality refers to the factors which limit people in their rational thinking.
A humans cognitive capacity is limited, which is why humans often use the impulsive systems and make decisions according to attentional biases, affective associations and approach avoidance tendencies.

Question 6

prospect theory

Answer 6

• not the expected utility
• but the expected gains and losses
• loss aversion, endowment effect

–> behavioural economics why this is the case

taking into account discounting and demand.

Question 7

regret aversion

Answer 7

….

Question 8

contingency management

Answer 8

• change circumstances:
• reinforce healthy habits
• detect substance use
• reward increases over time
• the reward is lost if you stop quitting

Question 9

community reinforcement approach , behavioural couples therapy, brief motivational interventions.

Answer 9

..

Question 10

traditional vs behavioural economics

Answer 10

behavioural economics take into account the bounded rationality. People make irrational decisions because they are limited by their cognitive capacity.

classical: expected utility maximisation –> people want to maximise their utilities.

Question 11

endownment effect
nudge

Answer 11

one values things more because you own them.

Question 12

hyperbolic discounting model explains : exponential discounting and delay discounting

Answer 12

exponential discounting: if there are two distal rewards. One is more likley to go after the bigger later reward than the smaller distal sooner.

Question 13

Heymans choice model of addiction

local vs global perspective ( Heyman)
–> approach
–> equilibrium

Answer 13

three core principles

1) preferences are dynamic
- change over time

2) given a series of choices, there is more than one way to frame the possible options.

–> local or global

3) people always choose the “better” option.

local: best in this moment
global: better overall option

Local: Choose between items one at a time.

Global: organize the options into sequences and than choose between the sequences.

–> drug addicts often go for the local choice. ( the drug wins there )

Question 14

probability discounting

Answer 14

the more uncertainty that is experienced towards the possible reward the less valued it is.

Question 15

status quo bias

Question 16

decision fatigue

Question 17

effect of financial incentive

Question 18

peanut effect

Answer 18

underrating small events –> bias and decision error

Question 19

narrow bracketing

Question 20

competing decisions system view Bickel ( addiction as a reinforcer pathology)

Answer 20

Is a model which describes addictions as a consequence to an either hypo active reflective system or a hyperactive impulsive system.

Question 21

arguments against addiction is a choice

Answer 21

The brains neuronal connection are flexible. If a person is taking drugs like heroin the consumption of the drug will spike new dopamine receptors and soon the drug will no longer spike a persons dopaminergic level but keep them at a normal level.

Therefore addicts who were at first liking the drug are when they become addicted drawn to taking the drug because of wanting to keep their dopaminergic level normal.

Question 22

shaffers syndrom model of addiction

Answer 22

addiction stems from an up normal underlying condition.

Question 23

Addiction vs Habit

Answer 23

Continued behaviour although there are severe negative consequences.

Question 24

Are financial incentives effective in promoting smoking cessation ? ( Volpp 2009)

Answer 24

The sample was taken from an international company from the USA.

The participants were seperated into two conditions :

1) Group one got information about smoking cessation programmes.

2) Group 2 received the same information about smoking cessation programmes as well as a monetary incentive if the participants managed to quit smoking.

100 dollar to complete the programm

250 dollar to remain abstinent 6 month after the program

400 dollar for remaining abstinent for 12 months.

The incentive group was more effective than the control yet the effect was relatively small.

–> follow up study did investigate whether it makes a difference if people only get an incentive if their whole group quits –> bigger effect.

Question 25

local equilibrium

Answer 25

the current values of the options are the same

Question 26

global equilibrium

Answer 26

both options have the maximal value