Critique of Maximizing Behavior (HL) Flashcards
what are the assumptions of consumer behaviour?
- Consumer rationality
- Utility maximization
- Perfect information
what is consumer rationality?
Consumers always make the choices that are best for themselves.
what is utility maximization?
Consumers always want the goods and services that give them the most utility.
Perfect information
Consumers know everything about the market, including the quality and price of every product.
what are the 3 consumer biases?
- rule of thumb
- anchoring + framing
- availability
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What is the rule of thumb bias?
consumers make decisions based on experience + common sense rather than precise calculations
what is anchoring/framing bias?
consumers’ decisions are impacted by the good they see first
What is availability bias?
peopel overestimate the likelihood of an event and make decisions based on that.
what is bounded self-control?
Consumers often let other people influence their decisions
what is bounded selfishness?
Consumers are not always selfish, and will sometimes make economic decisions that help others more than themselves
what is choice architecture?
deliberate designs to influence the choices to consumers
what are methods of choice architecture?
- default choices
- restricted choices
- mandated choices
explain default choices
using an example
If users are by default signed up to an email newsletter, for example, more users will remain than if users had to sign up themselves.
