Behavioural economics pt2

Question 1

Anchoring

Answer 1

People have a tendency to rely too heavily on the 1st piece of information offered in an unfamiliar situation

Question 2

Anchoring examples

Answer 2

When donating to charity, youre free to give as much as you wish, but the suggested donations “guide” your decision making.

Question 3

Social norms

Answer 3

Informal rules and biases that govern our day to day behaviour. What is acceptable or unacceptable. The government can change social norms which can permanently change consumer behaviour.

Question 4

Social norm examples

Answer 4

Smoking and drink driving were socially acceptable not long ago. However public heath campaigns and education has decreased their prevalence.

Question 5

Altruism

Answer 5

Behaviour that puts the welfare of another ahead of ones own.

Question 6

Altruism example

Answer 6

Giving money to a homeless person has no tangible again, however feeling good can still be seen as welfare maximisation which turns a selfless act to a selfish one.

Question 7

Choice architecture

Answer 7

The way a choice is presented affects how people respond. Designing one means considering how decisions should be offered to decision makers

Question 8

Framing

Answer 8

The way information is presented to put a positive or negative spin to influence decision making.

Question 9

Mandated

Answer 9

Where people are required by law to make a choice between alternatives. E.g. Australians have to vote

Question 10

Restricted choice

Answer 10

When there are too many choices, people tend to make poor choices or none at all. Having a manageable number of options avoid this e.g. energy company deals.

Question 11

Nudge

Answer 11

A concept that involves subtly guiding peoples choices and behaviours without restricting their freedom of choice.