Behavioural Economics Key Terms
Terms in this set (18)
An idea which challenges to an extent, the neo-classical assumption for individual maximising behaviour. For example, it would not be financially rational to do voluntary work, however this can be explained if one places value on the positive emotion of doing the act.
The tendency to be over reliant on a single number or piece of information in individual decision making.
When people make judgements about the probability of events occurring by recall of their own experiences or memory. E.g buying a snow shovel after a severe winter in preparation.
Based on the view that humans are unable to quickly and accurately process complex information, and that information may itself be incomplete or unreliable
The idea that, even when humans believe they know what is the most rational course of action, they are unable to see through that though, due to human failings
How choices can be influenced by the way in which the options are presented to the individual
Where too many choices are available to consumers, this is a form of imperfect information
When people seek out or process information in a way that fits with their existing views and preconceptions.
A pre-set course of action that takes effect if nothing is specified by the decision maker. E.g. having to opt out of organ donation
The tendency for individuals to be influenced by the context in which a choice is presented. E.g. Gym membership pricing by month rather than a lump sum
When people do what others are doing instead of relying on their own information for decision making
Where individuals use a "rule of thumb" rather than strict logic for decision making
A concept that argues that individuals focus more on avoiding losses than making gains
An aspect of choice architecture and a means of altering people's behaviour without influencing free choice
A form of bias that leads to individuals to overvaluing possessions, regardless of market value
Based on the assumptions of neo-classical economists that rational individuals will make decisions that maximise utility
A form of choice architecture, which limits the number of options given to consumers to restrict "overthinking"
A belief held by groups in society that influence how individuals behave in certain situations
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