behavioural economics Flashcards
traditional econmics
- consumers are always rational
rational consumers
take time to make utility maximising decision
behavioural economics
disputes rationality and utility maximisation
emotional, social and psychological factors can influence decision making
consumers are not always rational-
rationality bounded by
time choice and info
- being bounded by self control
heuristics
people follow heuristics or rule of thumb
simple way to make decisions
anchoring
value imprinted in our mind as a reference price to compare back to e.g. recommended retail prices
social norms
the way we choose to judge circumstances
avialability bias
how easy it is to conjure up examples
inflicting probabilities
framing
influenced by the way in which information is presented to us
loss aversion
not wanting to give things up
endowment effect- attaching too much monetary value to something you have, less willing to take part in that transaction
herd behaviour
making decisions because other people have made that decision
choice architecture
influenced by architecture, where somethinghas been placed
