Behavioural insights as a policy (improving market efficiency)

Question 1

Defaults

id

Answer 1

• Pre-set courses of action that take effect if nothing is specified by the decision maker
• An effective nudge when there is inertia or uncertainty in decision making

Question 2

Defaults pt2

Answer 2

• Defaults don’t require any effort by the decision maker - can be a simple but powerful tool when there is inaction
• When choices are difficult - may be perceived as recommended course of action
• Requires people to OPT OUT (organ donation)

Question 3

Framing effect

Answer 3

• Choices can be presented in a way which highlights their positive or negative aspects - changing their relative attractiveness

Question 4

Nudging

Answer 4

• Choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives
• The intervention must be easy and cheap to avoid - they are not mandates, e.g. putting fruit at eye level vs banning junk food

Question 5

Libertarian Paternalism

Answer 5

• The idea it is both possible and legitimate for governments to affect behaviour whilst also respecting freedom of choice
• Move markets to more efficient outcomes without forcing changes

Question 6

Choice architecture

Answer 6

• Influencing choice by ‘organising the context in which people make decisions’
• how food is displayed in cafeterias etc.
• Included other behavioural tools that affect decisions such as defaults, framing, or decoy options