Behavioural Economics Flashcards
(10 cards)
What is behavioral economics?
A field of economics that incorporates psychological insights into human behavior to explain economic decision-making.
What is loss aversion?
The tendency for people to prefer avoiding losses rather than acquiring equivalent gains.
What is mental accounting?
A concept where people treat money differently depending on its source or intended use.
What is the endowment effect?
The phenomenon where people value things more highly simply because they own them.
What is the status quo bias?
The preference to keep things the same rather than change, even when alternatives may be better.
What is bounded rationality?
The idea that people are limited in their decision-making capabilities by available information, cognitive limitations, and time constraints.
What is hyperbolic discounting?
A bias where people choose smaller, immediate rewards over larger, later rewards, valuing the present more heavily.
What is framing effect?
When people’s choices are influenced by how information is presented, rather than just the facts themselves.
What is overconfidence bias?
When individuals overestimate their knowledge or abilities, often leading to risky decisions.
What is nudging in behavioral economics?
Subtle policy shifts that encourage people to make decisions that are in their broad self-interest without restricting freedom of choice.
