Behavioral Economics Test 1- Solved
100% Correct
anchoring and adjustment heuristic - ANSWER-a heuristic used when forming
judgments: first pick an initial estimate (an anchor), then adjust up or down as
necessary
anchoring effect - ANSWER-a cognitive bias that people exhibit in which there is a
tendency to rely significantly on the first piece of information that is given or available
when making a decision
anomalies - ANSWER-systematic observations or findings that are not
predicted/explained by the conventional economic theory
behavioral economics - ANSWER-uses variants of traditional economic assumptions to
explain and predict behavior, and to provide policy prescriptions
bounded rationality - ANSWER-people are often unable to make use of what they know
about their available options and their preferences to figure out the best option
bounded self-interest - ANSWER-sometimes, people have unselfish behavior
bounded willpower - ANSWER-even when we know what's best for us, we often
succumb to temptations
choice overload hypothesis - ANSWER-increase in the number of options to choose
from may lead to adverse consequences such as a decrease in the motivation to
choose (decision paralysis) or decrease in the satisfaction with the finally chosen option
cognitive biases - ANSWER-systematic mental errors caused by our simplified
information processing strategies
cognitive reflective task - ANSWER-three questions that show "Systems 1 and 2"
compromise effect - ANSWER-people's tendency choose an alternative that represents
a compromise or middle option in the menu
decoy effect - ANSWER-occurs when a worse option is presented which causes
individuals to change their preferences
default option - ANSWER-an option that is automatically selected when the decision-
maker expresses no explicit choice
100% Correct
anchoring and adjustment heuristic - ANSWER-a heuristic used when forming
judgments: first pick an initial estimate (an anchor), then adjust up or down as
necessary
anchoring effect - ANSWER-a cognitive bias that people exhibit in which there is a
tendency to rely significantly on the first piece of information that is given or available
when making a decision
anomalies - ANSWER-systematic observations or findings that are not
predicted/explained by the conventional economic theory
behavioral economics - ANSWER-uses variants of traditional economic assumptions to
explain and predict behavior, and to provide policy prescriptions
bounded rationality - ANSWER-people are often unable to make use of what they know
about their available options and their preferences to figure out the best option
bounded self-interest - ANSWER-sometimes, people have unselfish behavior
bounded willpower - ANSWER-even when we know what's best for us, we often
succumb to temptations
choice overload hypothesis - ANSWER-increase in the number of options to choose
from may lead to adverse consequences such as a decrease in the motivation to
choose (decision paralysis) or decrease in the satisfaction with the finally chosen option
cognitive biases - ANSWER-systematic mental errors caused by our simplified
information processing strategies
cognitive reflective task - ANSWER-three questions that show "Systems 1 and 2"
compromise effect - ANSWER-people's tendency choose an alternative that represents
a compromise or middle option in the menu
decoy effect - ANSWER-occurs when a worse option is presented which causes
individuals to change their preferences
default option - ANSWER-an option that is automatically selected when the decision-
maker expresses no explicit choice
