Lecture 6 (what have we learned about encourage)

Question 1

Which cognitive biases does encourage nudges address (refine)

Answer 1

Reference denpendent preferences - People face the bias reference dependent preferences, when their preferences are dependent on the reference. Their behavior will change giving the reference, therfore sensitive to framing.

Example from Khanemann and Tvensky , 1996, where two groups are facing a surgery. Group 1 gets told that “One month after the operation 90% of people were still alive”. Group 2 gets told that “One month after the operation 10% of people have died”. Then the authors look at how many choose the operation. From group 1 84% choose the operation, where it is only 50% in group 2. Peoples behavior change dependent on the way information is presented and its context.

Overconfidence - When we overestimate our abilities and fall short.

Other regarding preferences - We conform to what others do and say. Affected by social norms. But we are also influenced by bad social norms.

Bounded self control - Includes present bias, which is our outline our weakness for choosing easy options now instead of better solutions later, which are better for us. Example with TikTok vs sleep, in the morning it seems like a good ideas to sleep instead of watching stupid videos on TikTok in the evening, but as you come closer it seems to be a better idea to watch TikTok. When the time come when you want to go to sleep, you watch TikTok. You can sleep good tomorrow instead. This example also introduce weakness of will and Preference Reversals, which are biases under bounded self-control. The closer it comes to bedtime, your preferences starts to reverse and if you get weak willed of doing the better option.