Choice architecture and framing

Question 1

What is the definition of Choice Architecture?

Answer 1

Choice architecture is the design of environments in which people make decisions, often used by policymakers to nudge individuals toward choices that align with their best interests or broader social goals.

Question 2

What is the concept of nudging in choice architecture?

Answer 2

Nudging uses subtle design to guide choices without restricting freedom, such as opt-out organ donation systems.

Question 3

What is the Default Choice in decision-making?

Answer 3

The default choice is the pre-set option in a decision, which significantly impacts outcomes. For example, automatic pension enrolment.

Question 4

What was the case study for automatic pension enrolment in the UK in 2012?

Answer 4

In 2012, the UK changed the default for pension savings from opt-in to opt-out. As a result, participation in pension schemes increased from 61% to 83%, and by 2014, 5 million workers were enrolled, with 90% not opting out.

Question 5

What is Framing in decision-making?

Answer 5

Framing is the influence of the presentation or context of information on decision-making. For example, presenting something as “90% fat-free” rather than “10% fat.”

Question 6

How is framing used in policy and marketing?

Answer 6

In policy, framing can involve presenting economic data, such as the budget deficit as a percentage of GDP. In marketing, framing can highlight positive aspects to influence consumer perception.

Question 7

What are the different types of choice architecture?

Answer 7

1. Default Choice
2. Mandated Choice
3. Restricted Choice

Question 8

What is the Default Choice in choice architecture?

Answer 8

The default choice is the pre-set option that people are likely to stick with, such as opt-out systems for organ donation or pension enrolment.

Question 9

What is Mandated Choice in choice architecture?

Answer 9

Mandated choice requires individuals to actively make a decision. An example is the Microsoft software installation process.

Question 10

What is Restricted Choice in choice architecture?

Answer 10

Restricted choice limits the number of options to simplify decision-making. An example is simplified energy tariffs offered by companies.

Question 11

What are the design principles for effective choice architecture?

Answer 11

1. Simplify Information
2. Provide Feedback
3. Collaborative Filtering
4. Incorporate Incentives (positive and negative)

Question 12

What does Nudge Theory refer to?

Answer 12

Nudge theory refers to influencing behaviour predictably without restricting options or significantly altering economic incentives. It aims to preserve individuals’ freedom of choice while guiding decisions.

Question 13

What are the characteristics of a nudge?

Answer 13

1. Transparent and open about intentions
2. Individuals retain freedom of choice
3. Provides information for informed decisions

Question 14

How does a nudge differ from a shove?

Answer 14

A nudge provides information for informed choices and encourages active decision-making, while a shove enforces behaviour through laws, bans, or financial incentives.

Question 15

What is the Behavioural Insights Team (BIT)?

Answer 15

The Behavioural Insights Team designs policies that leverage human biases and tendencies to influence decision-making, such as personalised communication and setting default choices.

Question 16

What are some real-world applications of behavioural insights?

Answer 16

Real-world applications include personalised letters for tax compliance and setting default choices aligned with public health goals.

Question 17

What are the limitations of using behavioural insights in policy?

Answer 17

1. Complex decisions may require more education and transparency
2. Risk of herd behaviour without critical evaluation

Question 18

What are the ethical concerns related to choice architecture?

Answer 18

Ethical concerns include the potential manipulation through nudges, and the risk that default choices may undermine active decision-making.

Question 19

When does choice architecture work best?

Answer 19

Choice architecture works best for simple, intuitive decisions and has limited impact on complex or high-stakes choices.

Question 20

What is Loss Aversion in behavioural economics?

Answer 20

Loss aversion is the concept that losses loom larger than equivalent gains, meaning people are more motivated to avoid losses than to achieve gains.

Question 21

What are Social Norms in decision-making?

Answer 21

Social norms refer to the influence of societal expectations on individuals’ decisions.

Question 22

What is Bounded Rationality?

Answer 22

Bounded rationality refers to the idea that individuals make decisions within cognitive limits, often leading to suboptimal choices.

Question 23

What are Heuristics in decision-making?

Answer 23

Heuristics are mental shortcuts that simplify decision-making, which can sometimes lead to biases.

Question 24

What are some further implications for economic policy based on behavioural insights?

Answer 24

1. Transparency in nudges
2. Feedback loops to enable learning
3. Tailoring incentives to behavioural tendencies
4. Ensuring individuals understand the consequences of their choices

Question 25

What is the summary of choice architecture and framing?

Answer 25

Choice architecture and framing highlight the role of behavioural insights in shaping decisions. Policies leveraging default choices, mandates, and framing can align individual behaviour with societal goals, but effective application requires balancing freedom of choice with ethical considerations.