Behavioural economics (Micro) Flashcards
Key terms on behavioural economics
What is behavioural economics?
Modern theory explaining social, moral and psychological factors influencing economic decisions.
What is bounded rationality?
People try be rational, but due to restrictions like time and available information, they are limited. (satisfying)
What is bounded self control?
People have good intentions but lack self discipline to seek rational intentions.
What are rules of thumb?
Shortcuts/informed guesses to save time and effort.
what is anchoring?
The tendency to rely on particular bits of information when making decisions.
What is availability bias?
People making judgments about the probability of an event based of recent experience.
what are social norms?
When people are influenced by others to make decisions.
What is altruism?
People are motivated to do the right thing.
What is choice architecture?
Influencing consumer decisions based off how products are presented (opt in vs opt out)
What is framing?
Influencing decisions through words or numbers, £3 a day rather than £1000 a year.
What are nudges?
Influencing choices through positive reinforcement/suggestions.
What is a default choice?
Making people actively have to choice the ‘undesirable’ option
What is a mandated choice?
People are legally required to make a decision
What is restricted choice?
giving a limited number of options.
