Managerial and Consumer Biases Flashcards
Choice Architecture
The many aspects of how a choice is posed that can be manipulated, intentionally or inadvertently, to influence the decisions we make
Info can be presented in different ways
Different mediums (movie vs. book)
Different language (stole vs. borrowed)
The calories in a product can influence buying habits
Confusion with serving size leads people to think something is healthier than it is
Loss aversion
The psychological impact of a loss of X is greater than the psychological impact of a gain of X
Confirm Shaming
When people make a decision, they are often asked “are you sure” to make them have to make the decision twice and hopefully think twice
Shaming people into doing the right thing
Ex: Speeding signs showing the chance of them getting in a car accident
Endowment effect
classic illustration of loss aversion
Goods are valued more when they are possessed than when they are not
Ex: Increasing Covid vaccination uptake with ownership-themed reminders
“Claim your vaccine today”
Ex: test driving a car to make it feel like it’s your own
Substituting questions
how we generate intuitive opinions on complex matters
Reword the question in order to fluctuate the different answers you could receive
Having the “look”
Voting for someone because they look more “presidential”
Overconfidence
Two types:
Overly precise predictions
Better-than-average effects
Overconfidence will hurt the party who is making the claim - looks conceded
Reference group neglect
Hubris: why so many big-budget movies are released on the same big weekends– production team thinks they’re the best
Probability and advice
The tone and way someone gives advice can influence the decision that people make
The spread and information collected about expectations can also impact the way that people vote/make their decisions
Preferences
Preferences are often constructed on the spot
Ex: attraction and compromise effects
Attraction effects
adding an irrelevant alternative into an existing choice set increases the proportion of people choosing an alternative from the original set
Ex: The inclusion of a dominated alternative that is closer to Toaster A essentially steals share from Toaster B, resulting in choice shares such as 70% for Toaster A and 30% for Toaster B
Compromise effect
Having something be the most expensive price makes it look too expensive, but putting something that is more expensive next to it makes it look like its a better value
Nudge
Any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or changing their economic incentives
Common nudge: default settings
Taxes, bans, and criminal penalties are NOT nudges
