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Economics REVISION 5 (micro) > Behavioural Economics > Flashcards

Flashcards in Behavioural Economics Deck (21)
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1
Q

What is bounded rationality

A

Most consumers and producers do not have sufficient information to make fully-informed judgements when making decisions. People opt to satisfied rather than maximise.

2
Q

What is heuristics

A

Mental short cuts of rules of thumb for decision-making

3
Q

What are default biases in choices

A

People prefer to carry on as they always have - people prefer to have the same behaviour

4
Q

What is choice architecture

A

The layout / sequencing / and range of choices that are available

5
Q

When is choice architecture often more effective

A

When it encourages simplicity in the decisions that people have to make and in which the benefits and costs are made clear

6
Q

Examples of choice architecture

A

Getting more people to use the salad bar at lunch

7
Q

How is our day-to-day behaviour in markets influenced by prevailing social norms or social customs

A

Social norms
Queuing behaviour
Smoking bans
Seat belts compulsory

8
Q

What is herding

A

When we often make decisions based in part on who is around us and the choices they make

9
Q

Examples of herding

A

Choosing items off a menu

10
Q

What is anchoring

A

Where an anchor of value or imprints is set in our minds which we then use as mental reference points when making decisions

11
Q

Examples of price anchoring

A

‘Big price drop’ campaigns

12
Q

What is priming

A

Our behaviour by cues that work subconsciously and prime us to behave / choose in certain ways

13
Q

Examples of priming

A

Certain types of music in a shopping centre

14
Q

What is framing

A

Offering a question a different way often generates a new reliance by changing the comparison set it is viewed in - altering the way information is provided

15
Q

Examples of framing

A

Privacy settings on Facebook

16
Q

What is availability bias / availability heuristic

A

Biases affect how people process complex information.

When we judge the likelihood of an event, or the frequency of its occurrence

17
Q

When are people less likely to change their decision

A

When their position is public

18
Q

What are commitment contracts and choices

A

When people feel strongly about activities where they have made a personal commitment

19
Q

Are behavioural nudges effective

A

They can give the impression that consumers are dumb

20
Q

Limitations of behavioural nudges

A

Cannot change deep rooted psychological problems such as alcoholism and street violence

21
Q

What is argued to be just as effective as nudges

A

Conventional policy interventions such as taxes, subsidies and regulations