Behavioural Economics Flashcards
Bounded rationality is
The idea that in decision-making, rationality of individuals is limited by the information they have
A well-established bias in which a person’s subjective confidence in his or her judgments is reliably greater than the objective accuracy of those judgments is known as?
The overconfidence bias
The Status quo bias is?
When a consumer buys something because it is the normal or usual thing that they buy even though it might not maximise utility
Anchoring describes?
The common human tendency to rely too heavily on the first piece of information offered
What are the effects of anchoring on a buyer?
Makes them bias to a certain positive or negative aspect of a product to influence their decision
The human tendency to follow what is most popular as it makes them feel safer in case of economic failure is known as?
Herd behaviour
The framing bias is
When people are attracted to a particular choice because of its presentation via framing
Bounded willpower refers to
The fact that human beings often take actions that they know to be in conflict with their own long-term interests
Bounded self-interest incorporates?
The comforting fact that humans are often willing to sacrifice their own interests to help others
Moral hazard occurs when?
One person takes more risks because someone else bears the cost of those risks
