Module 4 Flashcards
Status quo
An individual’s preference to maintain their current state even if a change in their circumstances would provide better options.
Endowment effect
The inclination to value and pay more for an item that is al- ready in possession than for an item that has yet to be attained.
Loss aversion
A tendency of individuals to be more attuned to losses than to gains.
Confirmation bias
A predisposition to accepting information that confirms one’s opinions or conclusions rather than information that is contradictory.
Mental accounting
Money is mentally allocated to several “accounts” such as clothing or entertainment rather than being perceived as fungible.
Willpower
The fact that individuals only have a certain amount of will- power at any given time and that willpower needs to be replenished periodically.
Hyperbolic discounting
To value benefits that are reaped now more than benefits reaped in the future. Consequently, costs that are paid in the future are not felt as deeply as costs that are paid now.
Choice overload
The presence of too many choices for a particular decision, making it difficult to evaluate and decide.
Information overload
The presence of too much information in the environment, preventing the individual from evaluating and making a good decision.
EAST principles
- Make it Easy
- Make it Attractive
- Make it Social
- Make it Timely
Why do defaults work?
- Endorsement
- Ease
- Loss aversion (endowment)
Default
the outcome if you don’t take any action
