Unit 1 AOS 3 Flashcards
(22 cards)
traditional economics
assumes consumers always make rational / self-interest decisions
behavioural economics
combines economics / psychology and assumes consumers don’t always make rational / self-interested decisions
bounded rationality
suggests that there are limits on consumer rationality when making decisions
bounded self-interest
while consumers can be selfish it’s not always the case - decisions can be affected by other beliefs such as fairness / desire to help others
status quo bias
a shortcut where consumers fail to examine all options when deciding on a purchase - instead sticking with what they have previously decided
bounded willpower
occasionally consumers don’t have necessary willpower / determination to make rational decisions and instead end up taking easy / less rational option that may not be in best long-term interest and may later regret their choice
herd behaviour bias
occasionally make irrational decisions in favour of doing what the rest of their peers are doing
framing bias
cognitive bias where people’s decisions are influenced by how info is presented
anchoring
people’s tendency to depend too much on initial piece of info they receive when making decisions
overconfidence bias
consumers overestimate current state of knowledge / skill, leading them to make ill-founded / irrational decisions
vividness bias
consumers place undue weight on just a small piece of info that stands out / catches their eye
short-term bias
consumers have bias towards those that provide immediate benefits rather than being more patient / taking long-term assessment that may ultimately be more beneficial / rational
risk or loss aversion bias
people make choices that place more weight on avoiding making a loss rather than making an equivalent gain
narrative fallacy
consumers can be sucked into various scams simply because of plausible / impressive way info is presented
the nudge
providing gentle reminder / prompt / something that catches attention and seeks to alter people’s behaviour in predictable / desired way without forcibly limiting their options
artificial intelligence programmes
can improve quality of decision making simply because they can factor in far more variables and thus overcome bias and limitations imposed by bounded rationality in making economic choices
product (5Ps)
product is better than the rest / meets a need / solves problem for consumers
price (5Ps)
must be profitable but also offers consumers value for money
people (5Ps)
able to enhance consumer’s shopping experience
place (5Ps)
convenience for consumers and depends on product / service sold
promotion (5Ps)
appropriately / positively engages target audience
multi-branding
common selling strategy where one company owns others with different names, even though they may produce a similar product out of the one factory
