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Choice Architecture
Choice architecture is the design of different ways in which choices can be presented to decision makers, and the impact of that presentation on decision-making. For example, each of the following: * the number of choices presented * the manner in which attributes are described * the presence of a "default" can influence consumer choice. As a result, advocates of libertarian paternalism and asymmetric paternalism have endorsed the deliberate design of choice architecture to nudge consumers toward personally and socially desirable behaviors like saving for retirement, choosing healthier foods, or registering as an organ donor. These interventions are often justified by advocates of libertarian paternalism in that well-designed choice architectures can compensate for irrational decision-making biases to improve consumer welfare. These techniques have consequently become popular among policymakers, leading to the formation of the UK's Behavioural Insights Team and the White Hous ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Choice
A choice is the range of different things from which a being can choose. The arrival at a choice may incorporate Motivation, motivators and Choice modelling, models. Freedom of choice is generally cherished, whereas a severely limited or artificially restricted choice can lead to discomfort with choosing, and possibly an unsatisfactory outcome. In contrast, a choice with excessively numerous options may lead to confusion, reduced satisfaction, regret of the alternatives not taken, and indifference in an unstructured existence; and the illusion that choosing an object or a course, necessarily leads to the control of that object or course, can cause psychological problems. Types One can distinguish four or five main types of decisions, although they can be expressed in different ways. Brian Tracy breaks them down into: # command decisions, which can only be made by you, as the "Commander in Chief", or owner of a company # delegated decisions, which may be made by anyone. Decisio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Soft Paternalism
Libertarian paternalism is the idea that it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice, as well as the implementation of that idea. The term was coined by behavioral economist Richard Thaler and legal scholar Cass Sunstein in a 2003 article in the ''American Economic Review''. The authors further elaborated upon their ideas in a more in-depth article published in the ''University of Chicago Law Review'' that same year. They propose that libertarian paternalism is paternalism in the sense that "it tries to influence choices in a way that will make choosers better off, as judged by themselves" (p. 5); note and consider, the concept paternalism specifically requires a restriction of choice. It is libertarian in the sense that it aims to ensure that "people should be free to opt out of specified arrangements if they choose to do so" (p. 1161). The possibility to opt out is said to "preserve freedom of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Hyperbolic Discounting
In economics, hyperbolic discounting is a time inconsistency, time-''inconsistent'' model of delay discounting. It is one of the cornerstones of behavioral economics and its brain-basis is actively being studied by neuroeconomics researchers. According to the discounted utility approach, intertemporal choices are no different from other choices, except that some consequences are delayed and hence must be anticipated and discounted (i.e., reweighted to take into account the delay). Given two similar rewards, humans show a preference for one that arrives in a more prompt timeframe. Humans are said to ''discount'' the value of the later reward, by a factor that increases with the length of the delay. In the financial world, this process is normally modeled in the form of exponential discounting, a time-''consistent'' model of discounting. Many psychological studies have since demonstrated deviations in instinctive preference from the constant discount rate assumed in exponential disc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Endowment Effect
In psychology and behavioral economics, the endowment effect, also known as divestiture aversion, is the finding that people are more likely to retain an object they own than acquire that same object when they do not own it. The endowment theory can be defined as "an application of prospect theory positing that loss aversion associated with ownership explains observed exchange asymmetries." This is typically illustrated in two ways. In a valuation paradigm, people's maximum willingness to pay (WTP) to acquire an object is typically lower than the least amount they are willing to accept (WTA) to give up that same object when they own it—even when there is no cause for attachment, or even if the item was only obtained minutes ago. In an exchange paradigm, people given a good are reluctant to trade it for another good of similar value. For example, participants first given a pen of equal expected value to that of a coffee mug were generally unwilling to trade, whilst participants f ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Status Quo Bias
A status quo bias or default bias is a cognitive bias which results from a preference for the maintenance of one's existing state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss or gain. Corresponding to different alternatives, this current baseline or default option is perceived and evaluated by individuals as a positive. Status quo bias should be distinguished from a rational preference for the status quo, as for when the current state of affairs is more beneficial to the available alternatives, or when imperfect information is a significant problem. A large body of evidence, however, shows that status quo bias frequently affects human decision-making. Status quo bias should also be distinguished from psychological inertia, which refers to a lack of intervention in the current course of affairs. The bias intersects with other non-rational cognitive processes such as loss aversion, in which l ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Loss Aversion
In cognitive science and behavioral economics, loss aversion refers to a cognitive bias in which the same situation is perceived as worse if it is framed as a loss, rather than a gain. It should not be confused with risk aversion, which describes the rational behavior of valuing an uncertain outcome at less than its expected value. When defined in terms of the pseudo-utility function as in cumulative prospect theory (CPT), the left-hand of the function increases much more steeply than gains, thus being more "painful" than the satisfaction from a comparable gain. Empirically, losses tend to be treated as if they were twice as large as an equivalent gain. Loss aversion was first proposed by Amos Tversky and Daniel Kahneman as an important component of prospect theory. History In 1979, Daniel Kahneman and his associate Amos Tversky originally coined the term "loss aversion" in their initial proposal of prospect theory as an alternative descriptive model of decision makin ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Default Effect
The default effect, a concept within the study of nudge theory, explains the tendency for an agent to generally accept the default option in a strategic interaction. The default option is the course of action that the agent, or chooser, will obtain if he or she does not specify a particular course of action. The default effect has broad applications for firms attempting to "nudge" their customers in the direction of the firm's optimal outcome. Experiments and observational studies show that making an option a default increases the likelihood that such an option is chosen. There are two broad classes of defaults: mass defaults and personalised defaults. Setting or changing defaults has been proposed and applied by firms as an effective way of influencing behaviour—for example, with respect to setting air-conditioner temperature settings, giving consent to receive e-mail marketing, or automatic subscription renewals. Default effect Endogenous default effects In a choice context ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Information Search Process
Information is an abstract concept that refers to something which has the power to inform. At the most fundamental level, it pertains to the interpretation (perhaps formally) of that which may be sensed, or their abstractions. Any natural process that is not completely random and any observable pattern in any medium can be said to convey some amount of information. Whereas digital signals and other data use discrete signs to convey information, other phenomena and artifacts such as analogue signals, poems, pictures, music or other sounds, and currents convey information in a more continuous form. Information is not knowledge itself, but the meaning that may be derived from a representation through interpretation. The concept of ''information'' is relevant or connected to various concepts, including constraint, communication, control, data, form, education, knowledge, meaning, understanding, mental stimuli, pattern, perception, proposition, representation, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Overchoice
Overchoice or choice overload is the paradoxical phenomenon that choosing between a large variety of options can be detrimental to decision making processes. The term was first introduced by Alvin Toffler in his 1970 book, ''Future Shock''.Thomas W. Simon, ''Democracy and Social Injustice: Law, Politics, and Philosophy'', Rowman & Littlefield, 1995, Google Print, p.143/ref> Psychological process The phenomenon of overchoice occurs when many equivalent choices are available. Making a decision becomes overwhelming due to the many potential outcomes and risks that may result from making the wrong choice. Having too many approximately equally good options is mentally draining because each option must be weighed against alternatives to select the best one. The satisfaction of choices by number of options available can be described by an inverted U model. In this model, having no choice results in very low satisfaction. Initially more choices lead to more satisfaction, but as the num ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Behavioral Economics
Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economic theory. Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory. Behavioral economics began as a distinct field of study in the 1970s and 1980s, but can be traced back to 18th-century economists, such as Adam Smith, who deliberated how the economic behavior of individuals could be influenced by their desires. The status of behavioral economics as a subfield of economics is a fairly recent development; the breakthroughs that laid the foundation for it were published through the last three decades of the 20th century. Behavioral economics is still growing as a field, being used increasingly in ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Utility
In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a normative context, utility refers to a goal or objective that we wish to maximize, i.e., an objective function. This kind of utility bears a closer resemblance to the original utilitarian concept, developed by moral philosophers such as Jeremy Bentham and John Stuart Mill. * In a descriptive context, the term refers to an ''apparent'' objective function; such a function is revealed by a person's behavior, and specifically by their preferences over lotteries, which can be any quantified choice. The relationship between these two kinds of utility functions has been a source of controversy among both economists and ethicists, with most maintaining that the two are distinct but generally related. Utility function Consider a set of alternatives among which a person has a preference ordering. A utility fu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |