Simple, useful tools that help an individual make a decision e.g. choosing the middle-priced option when faced with a range of different prices for similar products.
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Anchoring
This means placing too much emphasis on one piece of information, e.g. the first price quotedfor a job can influence an individual's view of what's a fair price.
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Availability Bias
This is where judgements are made about the probability of events occuring based on how easy it is to remember such events occuring, e.g. following a drought, people will overestimate the probability of a drought occuring next year, and make decision
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Social Norms
An individuals behaviour can be influenced by the behaviour of their social group e.g. an individual may stop buying cigarettes if none of their friends smoke.
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Habitual Behaviour
Doing the same thing over and over again, e.g. an individuals often choose to shop at the same place regardless of any ration reason for going elsewhere.
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Choice Architecture
Where an indivual's choice is influenced by adapting the way the choice is presented. This can be done by default options, framing, nudges, restricted choice and mandated choices.
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Default Options
People are more likely to choose the 'default' option, so this can be used to encourage individuals to act in a certain way- e.g. employees might automatically be rolled into a pension scheme.
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Framing
The context in which information is presented can influence a decision, for example £1 a day sounds more appealing than £7 a week.
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Nudges
This is where some alternatives are made eeasier to choose than others wwithout removing the freedom of choice, e.g. by only allowing smokingg in certain areas, a government can 'nudge' people into quitting.
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Restriced Choice
This occurs when people's choices are restricted, e.g. people are restricted to being only alowed to choose from schools in their areas.
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Mandated Choice
This is where people have to make a decision, e.g. a government may implement a policy where people have to choosse whether or not they're willing to be organ donors.
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Bounded Rationality
The idea that in decision-making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.
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Thinking fast (Daniel Kaheman)
Instinctive thinking, making quick decisionss witth little effort e.g. getting a coffee on a train.
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Thinking slow (Daniel Kaheman)
Reflective thinking, requiring concentration and mental effort, can lead to overthinking e.g. buying a car typically requires thinking slow.
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Altruism and Fairness
Individuals may not just act out of self-interest e.g. they may give money to charity because they gain utility from it or a firm may pay their employees above minimum wage because they thhink its fair.
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Bounded Self-Control
Its assumed that a 'homo economicus' has total self control, however this suggests that individuals have limits on their self control e.g a comsumer may have limited ability to stop smoking although the act of smoking doesnt maximise their utility.
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Shoves
A harsh version of a nudge, e.g. banning certain activities and passing laws.
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Loss Aversion
The choices that people make are found to be different if these choices are framed as a gain or a loss.
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Other cards in this set
Card 2
Front
This means placing too much emphasis on one piece of information, e.g. the first price quotedfor a job can influence an individual's view of what's a fair price.
Back
Anchoring
Card 3
Front
This is where judgements are made about the probability of events occuring based on how easy it is to remember such events occuring, e.g. following a drought, people will overestimate the probability of a drought occuring next year, and make decision
Back
Card 4
Front
An individuals behaviour can be influenced by the behaviour of their social group e.g. an individual may stop buying cigarettes if none of their friends smoke.
Back
Card 5
Front
Doing the same thing over and over again, e.g. an individuals often choose to shop at the same place regardless of any ration reason for going elsewhere.
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