Behavioural Economics

Question 1

What is price anchoring?

Answer 1

Relying on the first piece of information received, e.g. the first price offered or seen is then used to compare other prices

Question 2

What are social norms?

Answer 2

When a decision is influenced by rules dictated by society

Question 3

What is availability bias?

Answer 3

When a decision is based on how easy it is to think of an example, overestimating the risk of rare events

Question 4

What is framing?

Answer 4

When a decision is influenced by the way information is presented

Question 5

What is loss aversion?

Answer 5

When the pain of potential losses is felt more than potential gains leading to suboptimal investments

Question 6

What is herd behaviour?

Answer 6

When a decision is made because the people around you have done the same

Question 7

What is choice architecture?

Answer 7

When a decision is influenced by the location or placement of something

Question 8

What is the difference between a nudge policy and a shove policy?

Answer 8

A nudge policy uses behavioural economics to influence decisions (thus certain choices are incentivised but not necessarily forced) e.g. framing information about recycling

A shove policy is more forced e.g. taxes, subsidies or regulation