Behavioral Biases Quiz

Loss aversion is when humans emphasize a loss over a potential gain, perceiving the loss as greater. This leads to less rational behavior as people take more risks.

Anchoring is when people use a certain idea as a reference point for another concept. For example, seeing a $1200 shirt makes a $100 shirt seem cheap, influencing the decision to purchase.

Framing is when people react differently to something based on how it is presented, rather than the content itself. It influences decisions based on the presentation or context.

Availability heuristic is when humans judge the frequency or likelihood of an event based on past examples they can recognize. For example, being more likely to buy a lottery ticket if your uncle won the lottery.

Default bias occurs when humans follow routines or habits that are hard to break, leading to a preference for familiar products or actions. For example, Angelina going to Boost for the same drink every time.

People are more likely to take risks under loss aversion because they perceive losses as more significant than potential gains. This causes them to seek risky options to avoid losses.

Bounded rationality is when humans make decisions based on limited information, leading to simplified choices and decisions.

An example of bounded rationality is when a person chooses 'free-range' eggs based on ethics without fully understanding what 'free-range' means.

Bounded self-control refers to individuals having limits on their self-control, hindering their ability to maximize utility.

An example of bounded self-control is when someone fails to save money despite understanding the importance of saving for long-term financial stability.

Bounded selfishness is when consumers perform altruistic acts without expecting direct rewards or personal utility.

Imperfect information refers to consumers making decisions based on uniformed or wrongly informed choices due to lack of access to perfect information.