Behavioral Economic

• Choice architecture


  The design of decision environments, including how choices are presented, organized, and framed
• Choice architecture recognizes that small changes in how choices are presented can influence people's decisions
• Defaults

  Pre-set options that individuals can choose by taking no action
• Defaults

  • In organ donation systems, countries with an "opt-out" default have higher organ donation rates than those with an "opt-in" default
• Nudging


  Gently guiding individuals towards making better decisions without limiting their choices or using coercion
• Nudging


  • Placing healthy snacks at eye level in a school cafeteria nudges students towards making healthier food choices
• Framing


  How information is presented, which can influence choices
• Framing

  • A medicine may be described as having a 90% survival rate (positive frame) or a 10% mortality rate (negative frame), influencing perceptions of its effectiveness
• Decision fatigue


  When individuals become mentally exhausted from making too many decisions, they may opt for the default or easiest choice
• Decision fatigue


  • Shoppers may make healthier food choices earlier in the day but opt for fast food in the evening when they are fatigued from making choices throughout the day
• Choice architecture is widely used in policy-making, marketing, and healthcare to influence consumer choices and promote beneficial behaviors
• There are ethical concerns about influencing people's decisions without their full awareness or consent when using choice architecture
• Richard Thaler

  A Nobel Prize-winning economist who has done a lot of work on choice architecture and behavioral economics
• Nudge theory


  The idea that people's behavior can be influenced through small changes to their environment
• Restricted choice


  Intentionally limiting the available options to guide individuals towards making a particular choice
• Restricted choice


  • A school cafeteria offering a limited selection of healthy meal options to encourage students to make healthier choices
• Mandated choice


  Requiring individuals to make a decision or selection within a set of options, even if they might prefer not to choose
• Mandated choice


  • A company requiring employees to choose between enrolling in a retirement plan or opting out, rather than allowing them to avoid making a decision
• Bounded rationality


  The limited information processing, cognitive abilities, and willpower that constrain rational decision-making
• Satisficing


  Choosing an acceptable option that meets minimum criteria instead of searching for the absolute optimum
• Bounded self-control


  The difficulty in resisting immediate temptations despite knowing the long-term consequences
• Heuristics

  Mental shortcuts and rules of thumb used to simplify complex decisions
• Anchoring


  Excessive reliance on the first piece of information received, biasing subsequent judgments
• Availability


  Judging probabilities based on how easily examples come to mind, leading to inaccurate assessments of risk
• Social norms

  Implicit rules and expectations governing behavior within a group, influencing individual choices
• Altruism


  Acting in the interests of others, even at a cost to oneself
• Fairness


  Concern for equitable outcomes and reciprocity in social interactions and economic decisions
• Behavioral public finance


  A branch of economics that applies insights from behavioral economics to understand and design public policies