A method of economic analysis that applies to psychological insights into human behaviour to explain how individuals make choices and decisions
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Bounded rationality
When making decisions, an individual's rationality is limited by the information they have, the limitations of their minds and the finite amount of time available in which they make decisions
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Bounded self control
Limited self control in which individuals lack the self control to act in what they see as self interest
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Cognitive bias
A mistake in reasoning or in some other mental thought process occurring as a result of, for example, rule of thumb or holding onto one's preferences and beliefs, regardless of contrary information
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Rule of thumb
A rough practical method or procedure that can be applied when making decisions
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Anchoring
A cognitive bias describing the human tendency when making decisions to rely too heavily on the first piece of information offered (the anchor). Individuals use an initial piece of information when making subsequent judgements
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The availability bias
Occurs when individuals make judgements about the likelihood of future events according to how easy it is to recall examples of similar events
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Biases based on social norms
Social norms are forms or patterns of behaviour considered acceptable by a society or a group within that society
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Nudges
Factors which encourage people to think and act in particular ways. Nudges try to shift group and individual behaviour in ways which comply with desirable social norms.
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What do critics of behavioural economics argue?
Sanctions are more effective at changing behaviour and improving public health than nudges which only alter the behaviour of some people.
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Altruism
Concern for the welfare of others
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Fairness
The quality of being impartial, just or free of favouritism. It can mean treating everyone the same. Fairness involves treating people equally, sharing with others, giving others respect and time, and not taking advantage of them.
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Other cards in this set
Card 2
Front
When making decisions, an individual's rationality is limited by the information they have, the limitations of their minds and the finite amount of time available in which they make decisions
Back
Bounded rationality
Card 3
Front
Limited self control in which individuals lack the self control to act in what they see as self interest
Back
Card 4
Front
A mistake in reasoning or in some other mental thought process occurring as a result of, for example, rule of thumb or holding onto one's preferences and beliefs, regardless of contrary information
Back
Card 5
Front
A rough practical method or procedure that can be applied when making decisions
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