behavioural economics and govt. policy

• Choice architecture is the idea that individual decision making can be biased based on the location or presentation of information
• What is the central idea behind behavioral economics policies in overcoming market failures?

  Choice architecture
• Nudge policies are based on the principle that individuals are forced to make specific choices without freedom.

  False
• What is the primary difference between shove policies and nudge policies?

  Freedom of choice
• Framing, as a choice architecture policy, refers to the way information is presented
• Improving low-fat labeling is an example of framing to encourage healthier eating choices.
• How can price information be framed to encourage gym usage?

  Weekly or monthly breakdown
• Nudges can influence decision making by changing the product's location
• Steps to encourage recycling using nudges:

  1️⃣ Design appealing recycle bins

  2️⃣ Position bins in high-traffic areas

  3️⃣ Provide clear information on recycling
• What is the purpose of default choice in behavioral economics?

  Automatic enrollment unless opting out
• Default choice has been shown to increase the number of organ donors.
• Match the behavioral economics concept with its example:

  Framing ↔️ Calorie information on menus

  Default choice ↔️ Pension scheme enrollment

  Restricted choice ↔️ Public smoking bans

  Mandated choice ↔️ Organ donation in some areas
• Restricting the number of available choices for consumers is known as restricted choice.
• Why might nudges be considered paternalistic?

  Influence decision making
• If the cost of implementing nudges exceeds the benefits, it can lead to government failure.
• What is one argument against nudges based on consumer behavior?

  People are not easily influenced
• Steps to evaluate the effectiveness of nudge policies:

  1️⃣ Identify the problem

  2️⃣ Select appropriate nudges

  3️⃣ Implement the policies

  4️⃣ Measure the outcomes

  5️⃣ Adjust or replace policies
• Deep-rooted issues like addiction can be effectively addressed by nudges alone.

  False
• Shove policies like taxation and subsidies are always more effective than nudges.

  False
• What might be a better approach than nudges for overcoming market failures if information is the primary issue?

  Information provision
• Combining nudges with shove policies can lead to a socially optimum level.