Bias

Question 1

Who discovered New Classical Economics?

Answer 1

Oskar Morgenstern and John Von Nueman

Question 2

Who Discovered Behavioral Decision Theory?

Answer 2

Herbert Simon

Question 3

What is Behavioral Decision theory? 
Preferences:
Transitive:?
Time:?
Information processing constrained:?

Answer 3

Preferences are: Broadening of NEO Classical 
Constructed
Not necessarily transitive
Can be time inconsistent
Information processing is constrained

Question 4

What is Neo Classical Economics?
Preferences:
Transitive:?
Time:?
Information processing constrained:?

Answer 4

Preferences are: ALWAYS THERE
Discovered
Transitive
Time consistent
No capacity Constraints

Question 5

What is the Rational Agent Model?

Answer 5

Given the right information you will maximize your utility

Question 6

What is VNM Rational?

Answer 6

You are rational if you follow expected utility

Question 7

Implication of VNM

Answer 7

If you preferrer option A to option B they should ALWAYS choose A

Question 8

What does Constructed mean in the Behavioral theory?

Answer 8

Context shapes the decision. I.E Candy bar placement in store

Question 9

What does Not transitive mean in the Behavioral theory?

Answer 9

there are times where we prefer B over A and A over B, its not consistent

Question 10

What does inconsistent mean in the Behavioral theory?

Answer 10

We change over time, we don’t like baby anymore or don’t like Jello like we did when we were kids.

Question 11

What does it mean that information processing is constrained?

Answer 11

There can be shortcuts, we don’t have to elaborate

Question 12

Which theory does Rational Agent Model fall under?

Answer 12

Neo Classical

Question 13

Which theory does bounded rationality fall under?

Answer 13

Behavioral Decision

Question 14

What is bounded Rationality?

Answer 14

People will Satisfice- Choose products beyond a sufficient threshold, are inconsistent, ineffective and often require help making choicesc

Question 15

Implications of bounded rationality:

Answer 15

Implies that people are predictably irrational, these are known as biases that are systematically irrational, it will happen over and over again. a deviation of how we should behave

Question 16

Consumer Behavior implications of Neo Classical Economics

Answer 16

helps firms learn to efficiently communicate information to facilitate consumer choice and to facilitate preference discovery (Like comparisons)

Question 17

Consumer Behavior Implications of Behavioral Decision Theory

Answer 17

Helps firms know what consumers want and their needs and how to shape consumer choice. (mayhems is everywhere)

Question 18

What is the primary lesson from Prospect theory?

Answer 18

Segregate gains, Maximize losses

Question 19

what Peak end Effect?

Answer 19

Ening on a horrible notes creates the impression of lasting memory of the thing.

Question 20

What do we remember the most in peak end effect?

Answer 20

Peak and the end and the first are the most memorable things we experience. End on a good note.

Question 21

What is System 1?

Answer 21

Automatica System

Question 22

What is System 2?

Answer 22

Reflective System

Question 23

What is automatic System?

Answer 23

System 1, uncontrolled, effortless, associative, fast, unconscious skilled (gut) eventually rely on gut

Question 24

What is the Reflective System?

Answer 24

System 2, Controlled, effortful, deductive, slow, self aware, rule following. (Deciding which route to take for a trip wether to go to law school or business)

Question 25

What are someProcessing Biases (7 of them) (OC-G&L-SQB-Rep-Fram_Anc-Ava)

Answer 25

Overconfidence
gains and losses
status quo bias
Representativness
Framing
Anchoring
Availability

Question 26

what is Anchoring bias?

Answer 26

You start with some anchor, the number you know, and adjust in the direction you think is appropriate. Also affects answers like how happy are you and are you dating.

Question 27

What is Availability bias?

Answer 27

People asses the likelihood of risks by asking how readily examples come to mind. Like after a flood people are more likely to get insurance. Remind people of incidents where it didn’t happen.

Question 28

What is Representativeness bia?

Answer 28

How likely is it that A belongs to category B This is one is used because it often works. but not always true like linda a feminist How likely it is that she is a bank teller and in the feminist movement.

Question 29

What is overconfidnce bias?

Answer 29

Unrealistic optimism explains a lot of risk. Like people getting married or starting a business in the face of facts

Question 30

What is Gains and losses bias?

Answer 30

People value things twice as much when they have them. Losing something makes you twice as miserable as gaining the same thing that makes you happy. CASH

Question 31

What is Status Quo bias?

Answer 31

We don’t change or alter subscription, Free subscriptions we forget to cancel

Question 32

What is Framing bias?

Answer 32

Choices depend, on the way in which problems are stated. 90 of 100 are alive is better than 10 of the 100 are dead/

Question 33

What are heuristics?

Answer 33

Mental Shortcuts. Methods that use principles of effort reduction and simplification

Allow decision-makers to process information in a less effortful manner than one would expect from an optimal decision rule

Question 34

Hard-Easy Affect

Answer 34

We are underconfident we think we will do worse than we actually do, when its easy we think we will do better than we think we would.

Question 35

What is Associative Coherence?

Answer 35

Ideas tend to activate compatible ideas