Behavioral Economics Crash Course

Behavioral economics highlights that human decisions are often influenced by psychological, social, and emotional factors, contradicting the assumption that individuals always act rationally.

Bounded rationality limits consumers' ability to make fully informed decisions due to constraints on time, information, and cognitive resources.

Marketing can alter consumers' perceptions of value, leading them to associate higher prices with higher quality, which can subsequently enhance their enjoyment of the product.

<p>Emotional factors, referred to as 'Animal Spirits', drive irrational exuberance, leading investors to inflate asset prices beyond their fundamental values during market bubbles.</p> Signup and view all the answers

<p>The ultimatum game reveals that individuals often prioritize fairness over pure self-interest, as many reject offers they perceive as unjust, even if it means forgoing potential benefits.</p> Signup and view all the answers

<p>Psychological pricing strategies, such as advertising low daily costs, make products appear more affordable, affecting purchasing decisions positively.</p> Signup and view all the answers

<p>Nudge theory suggests that minor adjustments in the decision-making environment, such as food placement, can promote healthier choices among students.</p> Signup and view all the answers

<p>Loss aversion signifies that perceived losses have a more substantial impact on decisions than equivalent gains, leading individuals to prefer guaranteed outcomes.</p> Signup and view all the answers

<p>Behavioral insights can be applied by implementing measures like taxes on plastic bags, leveraging loss aversion to discourage usage.</p> Signup and view all the answers

<p>Recognizing emotional and psychological elements is crucial because they play significant roles in human behavior, challenging the view of individuals as purely rational agents.</p> Signup and view all the answers