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Question 1

What kind of tools are nudges?

Answer 1

Nudges are low-cost tools that alert, remind, or mildly warn people by exploiting human psychology, thereby molding behavior in powerful ways.

Question 2

Libertarian Paternalism

Answer 2

People should be free to do what they want and opt out if they want. Make it easy for people to go their own way but try to make choosers better off as judge by themselves.

Libertarian: choice-preservering & opting out it easy.

Paternalism: guid/influence people’s choices in a way that will make them better off, as judged by themselves. 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.

Question 3

What are common misconceptions on human decision making that are often found in policy makers?

Answer 3

Misconception 1: It’s possible to avoid influencing people’s choice with nudges.

• Agents must make a choice that will affect the behaviour of some other people.

Misconception 2: paternalism always involves coercion.

• No coercion is involved, so paternaism should be acceptable even to those who most embrace freedom of choice.

(Misconception 3: governments steering citizens choices is manipulative because they use scientific evidence for their own policy.)

Question 4

Choice architecture

Answer 4

Involves organizing any context in which people make decisions.

Though no design can be perfect, choice architects are always faced with tradeoffs and must make a decision of some sort.

Thus, the question is not whether to go about engaging in choice architecture, but how best to do so.

Question 5

When are you a choice architect?

Answer 5

If you indirectly influence the choices other people make.

Question 6

What is the main difference between System 1 and 2?

Answer 6

Speed

Question 7

True or false: System 1 can guide us in the wrong direction

Answer 7

True, but not always.

It can be adaptive. You have an intuitive understanding of complex cases because your reasoning is automatic.

Question 8

Anchoring heuristic

Answer 8

You start with an anchor and adjust in a direction you think is appropriate. The adjustment if often insufficient. The more you ask, the more you tend to get.

Nudge by giving a starting point for your thought process. This results in bias when our adjustments are insufficient or when obviously irrelevant anchors creep into the decision-making process.

Question 9

Through what does anchoring work?

Answer 9

Through framing, starting point and defaults.

Question 10

Representativeness heuristic

Answer 10

Similarity/stereotype heuristic

We judge how likely it is that A belong to category B by thinking about how similar A is to our stereotype of B. But you ignore base rates.

You use cues other than numbers. You neglect the base rate and think of a stereotype.

‘global = local’

Question 11

Availability heuristic

Answer 11

People assess the likelihood of risks by asking how readily examples come to mind.

Closely related to availability:

• Accessibility (recent events)
• Salience (vivid and easily imagined)

This can lead to overestimating the probability of recent or dramatic harms and to underestimate the probability of subtle or unfamiliar harms.

Question 12

What kind of behaviour does the availability heuristic explain?

Answer 12

Risk-related behaviour.

Question 13

A nudge for the availability heuristic

Answer 13

A nudge can be reminding people of the true probabilites.

Question 14

Why is the availability heuristic a problem?

Answer 14

Governments allocate resources in a way that fits people’s fears rather than in response to the most likely danger.

Question 15

What heuristic do travel insurances use to their advantage?

Answer 15

Availability => affect heuristic (substituting fear)

People are more willing to pay for a more fearful situatino.

Question 16

What heuristic do casinos use to their advantage?

Answer 16

Availability heuristic

They make the memories of winning clearer in our mind due to the sounds and hysteria among a winner. That way you remember these events more easily and think that you will win as well.

Question 17

Overconfidence

Answer 17

People tend to have self-serving biases through which they focus on their strengths, while overlooking or rejecting their faults.

Regardless of whether the stakes are high or low.

Especially for complicated tasks.

Question 18

Optimism

Answer 18

A bias where people are unrealistically optimistic.

This explains risk-taking.

An example is the ‘above average effect’.

E.g., not adding money to an emergency fund because you overestimate your job security.

Question 19

Framing effects

Answer 19

People are somewhat mindless and passive decision makers. The reflective system doesn’t check if reframing is different/passive.

Question 20

Status quo bias

Answer 20

People have the tendency to stick with their current situation.

It’s a combination of loss aversion and lack of attention.

Giving something up is painful.

‘yeah, whatever’ heuristic

Same for default option.

Question 21

What is the following an example of?

People oversetimate how quickly they can do work and underestimate how long it takes them to get things done.

Answer 21

Overconfidence

Question 22

What is the following an example of?

You say “9/10 chance of surviving” while someone else says you have a “1/10 chance of dying”

Answer 22

Framing effects

Question 23

What is the following an example of?

McDonalds menu: a burger goes with fries and drinks

Answer 23

Anchoring heuristic

Question 24

Categories of social influence

Answer 24

• Information
• Peer pressure

Question 25

Information as a category of social influence

Answer 25

Social proof: if many people do something, their actinos convey information about what is best for you to do/think.

Question 26

Peer pressure as a category of social influence

Answer 26

Desire not to face disapproval of the group: if you care about what others think of you, you might go along with the crowd to avoid their wrath.

Question 27

Spotlight effect

Answer 27

People tend to ovestimate how much others notice aspects of one’s appearance or behaviour.

Question 28

Conformity effects

Answer 28

People follow the behavior of others, even though you know they’re wrong.

Question 29

Collective conservatism

Answer 29

The tendency of groups to stick to established pattns even as new needs arise.

Question 30

Pluralistic ignorance

Answer 30

Ignorance about what other people think. A minority position is wrongly perceived to be the majority position.

When people mistakenly believe that everyone else holds a different opinion from their own.

Question 31

Cascade

Answer 31

Informational cascade

• Trusting other’s opinions. Not because you agree, but because you trust the person and he’s not wrong.

Reputational cascade

• When people go along with others. Not beause they elarned from them, but because they don’t want to incur their disapproval.
• Your reputation is at risk.

Question 32

Priming

Answer 32

Increases the ease with which ceretain information comes to mind.

Question 33

Post-completion error

Answer 33

After finishing a task, people t end to forget things relating to previous steps.

E.g.,

• Forget original of copy in the machine

Question 34

Forcing function

Answer 34

Solution to post-completion error.

To get what you want, you have to do something else first.

E.g.,

• First take out cash and then card.

Question 35

What strategies do we use when choices get large?

Answer 35

Elimination by aspects

• E.g., when looking for a house: only houses within 30 minutes, 2 bedrooms…

Compensatory strategy

• E.g., one high value for an attribute can compensate for a low value for another attribute (big office, but loud neighbour).

Collaborative filtering

• E.g., get recommendations based on preferences of other movie lovers with similar taste (Netflix recommended).

Question 36

Channel factors

Answer 36

Small influences that facilitate or inhibit behaviour. Facilitate good behaviour by removing obstacles instead of trying to show people in a certain direction.

E.g., push/pull (stimulus response compatibility)

Question 37

Different kinds of choices

Answer 37

Required or mandated choice

Active choosing

Prompted choice

Question 38

Required or mandated choice

Answer 38

It’s the best way to go, but consider 2 objections:

• People prefer a good default and consider required choice to be a nuisance/worse
• It’s more appropriate for yes/no decisions than for complex choices.

Question 39

Active choosing

Answer 39

Choice architects can find out what people prefer instead of having to guess.

It can overcome:

• Inertia
• Inattention
• Procrastination

Question 40

Prompted choice

Answer 40

Less intrusive and softer than required choice, which forces people to say what they want.

Question 41

Sludges

Answer 41

They make it harder for people to make a choice or do something that makes them better of.

Goal is to make pricing less transparent.

Unsubscription trap

• Leaving is much more effort than joining.
• You get a special offer if you quit with membership when it’s too expensive. This is price discrimination: to get a lower price, the consumer must do something.

Rebates

• People are optimistic about the likelihood they get discounts. Sludge is to redeem the coupon.

Shrouded attributes

• The shrouded attributes and their costs are hard to discover.
• For example, buying a printer is cheap, but the ink is expensive.

Question 42

Why does the default work?

Answer 42

• Status quo bias
• Laziness
• Procrastination
• Lack of salience
• Sludge: opting out is costly

Question 43

Who pays more attention?

Answer 43

• If you have more time, you can pay more attention
• If you’re educated, you pay more attention
• If you care more, you pay more attention

Question 44

Organ donation consent

Answer 44

Explicit consent

• default is no
• opt-in if you want

Presumed consent

• default is yes
• opt-out if you want

Prompted choice

• default is no
• opt-in if you want (enhances explicit consent; ask at the renewal of driving license)
• gives the family the power to overrule if you didn’t give preference

Mandated choice

• no default
• you get questioned and must make a choice
• doesn’t give family
  power to overrule

Question 45

Obstacles for saving the planet

Answer 45

Present bias: people concern more over now instead of later.

Salience: if you can’t see it, you don’t worry about it.

No specific villain: it’s a product of actions of many people.

Probabilistic harms: makes it hard to reach a consensus.

Loss aversion: people are more negative about losses than positive about gain.

The tragedy of the commons: free riding. Incentives are not properly aligned: you don’t pay for the harms you inflict.

No clear feedback: on the environmental consequences of actions (you don’t think about the costs of turning on the heater every day).