Topic 2 Economic Decision Making Flashcards
What is imperfect information
Any information that is missing
A-symmetrical information
When the producer or consumers know more than the other
What is Bounded rationality
Making the best choice from information given
Bounded self control
When the consumer knows it Is a bad idea but still does it anyway
What is the rule of thumb in terms of biases in decision making
It is sticking by one rule e.g. higher price means better quality
What is anchoring in terms of biases in decision making
Anchoring is when you know odds are against you but you carry on anyway e.g. if you win once at a casino you are more likely to go back even though the odds are against you
What is social norm in terms of biases in decision making
You make decisions based on others e.g. friends smoking cigarettes and you join in
What is availability in terms of biases in decision making
When people favour the information that is easily available to them instead of what takes more time but is better information
What is altriumn in terms of biases in decision making
When people make sacrifices without expecting a personal reward and care about the utility of other people
What are examples of choice architecture and framing
Default choice, restricted choice , mandated choice , nudges
What is a default choice
Decisions made by others and you stick with them e.g. buying same newspaper as your dad
What is restricted choice
Can only choose from 1-2 things
What is mandated choice
Forced to make a decision e.g. going to school
What are nudges
Things that nudge the consumer to do the right thing e.g. smoking kills signs on cigarette packets
What is a utility
Total satisfaction regarding people
