Behavioural Economics (Quizlet Revision Activity)

Here is an updated Quizlet revision activity covering thirty key terms in behavioural economics.

Altruism

When we behave with more kindness and fairness than if we behaved rationally

Anchoring

When we are influenced in an exaggerated way by the first piece of information received.

Availability heuristic

A mental shortcut that relies heavily on immediate examples that come to mind when forming a judgement

Behavioural economics

Method of analysis that applies psychological insights into human behaviour to explain economic decision-making

Bias

Systematic deviation from what is believed to be a rational choice

Bounded rationality

Decisions that flow from the limited cognitive, decision-making capacity of humans

Butterfly effect

Small details make big differences

Choice architecture

Careful design of how options are presented can influence our decisions

Choice overload

When someone has too many options to make a fully-informed rational decision

Commitment contract

Involve the individual voluntarily losing lose money if they do not engage in a future behaviour to which they have committed

Confirmation bias

When people seek out information in a way that fits with their existing thinking and preconceptions

Default choice

Option that a consumer "selects" if he or she does nothing

Endowment effect

When we value things we own more than the things we do not own

Framing

How we make a decision based on how the information and data is presented to us

Gambler's Fallacy

Belief that future probabilities are altered by past events when in fact they are independent

Herd behaviour

When individuals act collectively as part of a group

Heuristic

When people use "rules of thumb" to help make a decision

Hyperbolic discounting

Valuing the immediate benefit or cost much more than the future impact

IKEA effect

Tendency for us to place a disproportionately high value on objects we have partially assembled ourselves

Loss aversion

When a loss is much more painful than an equivalent gain is rewarding

Nudge

A minimalist intervention to change behaviour in an easy, timely, social way

Present bias

Tendency to focus only on immediate costs and benefits

Priming

We are subconsciously influenced by small cues such as bad smells, dirty shop floors

Prospect theory

Explains how we feel about the things we lose - the feeling of loss can be several times greater than the feeling of gain

Scarcity bias

We value things more when they are limited in number or are only available for a limited time

Social image

Humans present themselves to look good to others in order to produce positive rewards

Social norms

When our day-to-day behaviour is influenced by prevailing customs

Status quo bias

The preference to keep things the way they are rather than change

System 1 Thinking

When we consider what automatically comes to mind. Decisions made on autopilot, effortless, immediate

System 2 thinking

Slower, controlled, effortful decision-making often governed by rules