Book part 1 Flashcards
The concept of a nudge
- Choice architecture aspects that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives
- Provide the key to predictability altering people’s behavior without forbidding ay course of action outright of signficantly changing their intentive structures
Libertarian Paternalism
- People should be free to do whay they want and opt out if they want
- Libertarian = choice-perserving and opting out is easy
- Paternalism = effort to protect people against their own errors by guiding them to choices they would make if they were fully informed and free from biases
Misconceptions on human decision-making
- It’s possible to avoid influencing people’s choices
- Paternalism always involves coercion
- Governments steer citizens choices to manipulate because they use scientific evidence for their own policy
Choice architecture
Organizing any context in which people make decisions
Dual systems
- Automatic system
- associated with oldest part of our brain
- gut feeling
- you can always access it
- relying on it can guide you to the wrong decision, but not always
- not less superior, it’s older revolutionary, adaptive and lets us make quick decisions for survival - Reflective system
- conscious thought
- requires access to capacity-limited central working memory recourse
- can be disrupted by concurrent memory load
- correct impulsive chocies, empower people and lead to better decision making
Anchoring heuristic
Cognitive bias where individuals rely on an initial piece of information when making decisions
Example of anchoring heuristic
- When customers are presented with tipping options like 15%, 20%, or 25%, the presence of higher percentages anchors their perception of what is “normal” or “appropriate,” often leading to higher tips
- The anchor shifts expectations upward, even if a lower tip might have been acceptable without the prompt
- At McDonald’s, for example, a burger is commonly paired with fries and a drink as a “default” combo. This framing anchors the customer’s thought process to include these items, increasing the likelihood of purchasing the combo rather than only the burger.
Representativeness heuristic
- We judge how likely it is that A belongs to category B by thinking how similar A is to our stereotype of B
- Ignoring base rates
Example of representativeness heuristic
- 20% play chess and 80% play soccer.
- Peter is in the class, has glasses and reads books.
- How likely is it that Peter is in the chess group?
- Or chess is 80% and soccer is 20%?
- People give the same answer in likability.
Availability heuristic
- People assess the likelihood of risks by asking how readilu examples come to mind
- Accessibility and salience are closely related tp availability]
- Overestimating the probability of recent or dramatic harms and to underestimate the probability of subtle or unfamiliar harms
- Risk-related behavior
Example of availability heuristic
- If you experienced a flood, you’re more likely to believe a flood is likely to happen
- Governments allocate resources in a way that fits people’s fears rather than in response to the most likely danger
- Travel insurance affects heuristic (substituting fear): people are more willing to pay for a more fearful situation
- If something is recent, familiar, personal and important, it makes it easier (salient) to remember and retrieve.
Overconfidence
- Poeple tend to have self-serving biases through which they focus on their strenghts while overlooking or rejecting their faults
- People underestimate how long it takes them to get things done
Optimism
People are unrealistically optimistic which explains risk-taking
Framing effects
- People’s decisions are influeced by how information is presented, rather than the information itself
- Individuals often rely on fast decision-making processes rather than reflective, analytical thinking they can be swayed by subtle changed in wording or context
Example of framing effects
- When presenting medical treatment options, people are more likely to choose an option described positively (e.g., “90% chance of surviving”) than negatively (e.g., “10% chance of dying”), even though both convey the same probability.
- Positive framing emphasizes gains or benefits, triggering optimism, while negative framing highlights losses or risks, triggering fear or aversion.
Status quo bias
- People have the tendency to stick with their current situation
- Combination between loss aversion and lack of attentiojn
2 categories of social influence
- Information (social proof): if many people do something, their actions convey information about what is best for you to do
- Peer pressure: desire not to face disapproval of the group
Spotlight effects
People tend to oversestimate how much others notice aspects of one’s appearance or behavior
Conformity effects
People follow the behavior of others, even though you know they are known
Collective conservatism
Tendency of groups to stick to established patterns even as new needs arise
Pluralistic ignorance
Ignorance about what other people think - we do something because we think other poeple like it (Nazism)
2 types of cascade
- Informational cascade: trusting others’ opinion - not because you agree, but because you trust the person and they’re not wrong
- Reputational cascade: when people get along with others - not because they learned from them, but because they don’t want to incur their disapproval
Priming
Increases the ease with with information comes to mind
Princples of good choice architecture
- Incentives: motivate people to do something
- Salience: you can manipulate people’s attention to incentives
- Understand how people make choices and how choices and outcomes are mapped in the minds of people
- Default: what happens if you do nothing
- Structure complex choices: make choice-outcome clear
Snudge
A decision-making strategy where individuals structure their own environment or decision process to simplify choices and align them with personal goals or preferences.