BEHAVIOURAL
ECONOMICS
Understanding how customers make decicions
Mastering the understanding of human irrationality is a part of business governance
Decoy effect
Is the option that is added to nudge you towards the target.
The decoy effect is an example of a behavioral nudge, an intervention that “steers” individuals towards making a certain choice
Choice Overload
A situation in which someone is faced with too many choices or options. The outcome is likely to be one of the following: stress in the decision-making process, resulting in greater chance of going with the default option
Confirmation Bias
is favoring information that confirms our previously existing beliefs people.
Confirmation Bias happens when a person gives more weight to evidence that confirms their beliefs and undervalues evidence that could disprove it.
Anchoring Bias
Called also focalism is a cognitive bias where an individual depends too heavily on an initial piece of information offered to make subsequent judgments during decision making. Once the value of this anchor is set, all future negotiations, arguments, estimates, etc. are discussed in relation to the anchor
Loss-aversion bias
Loss aversion is a cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. Our aversion to loss is a strong emotion. The aversive response reflects the critical role of negative emotions (anxiety and fear) to losses (Rick, 2011)
Bandwagon effect
The bandwagon effect is a psychological phenomenon in which people do something primarily because other people are doing it, regardless of their own beliefs, which they may ignore or override.
It is also called groupthink. People affected by Bandwagon Effect generally do not research and come up with their own opinion
