Key Management Concepts Flashcards
(12 cards)
What is Homo Economicus?
A theoretical person who always makes rational decisions to maximize utility and balance constraints, with absolute preferences.
What distinguishes Homo sapiens from Homo Economicus?
Homo sapiens have relative preferences that shift depending on comparison objects and are often confused by uncertainty.
Define cognitive bias.
A systematic pattern of deviation from norm or rationality in judgement.
What is action bias?
The tendency to favour action over inaction even if it won’t lead to a better outcome.
What is the base rate fallacy?
The tendency to assign greater value to individuating information while ignoring objective, statistical base rate information.
What does choice overload refer to?
The feeling of being overwhelmed when presented with too many options.
What is the disposition effect?
The tendency to prematurely sell winning assets and hold on to losing assets in hope of gains.
What is the google effect?
The tendency to not commit to remembering something because it is easily accessible online.
What does the illusory truth effect describe?
The tendency to believe false information as true when it is heard repeatedly.
What is the nostalgia effect?
The tendency to place value on the past instead of saving money.
What is the ostrich effect?
The tendency to avoid negative information.
What is salience bias?
The focus on information that we find interesting while ignoring information we don’t find interesting.
