Behavioral Economics
The study of psychology as it relates to the economic decision-making processes of individuals and institutions. Essential for understanding and influencing user decision-making and behavior in economic contexts.
109 topics found for:
“economic decision-making”
Standard Economic Model
A theoretical framework in economics that assumes individuals act rationally and seek to maximize utility, used to predict economic behavior and outcomes. Important for understanding traditional economic theories and designing systems that account for rational decision-making.
System One
A mode of thinking, derived from Dual Process Theory, that is fast, automatic, and intuitive, often relying on heuristics and immediate impressions. Important for understanding how users make quick decisions and respond to design elements instinctively, aiding in the creation of intuitive and user-friendly interfaces.
Take the Best Heuristic
A decision-making rule where individuals choose the option with the highest perceived value based on the first good reason that comes to mind, ignoring other information. Crucial for understanding and designing for quick decision-making processes.
Satisficing
A decision-making strategy that involves choosing an option that meets the minimum requirements rather than seeking the optimal solution, balancing effort and outcome. Important for designing user experiences that accommodate decision-making under constraints.
Expected Utility Theory
A theory in economics that models how rational individuals make decisions under risk by maximizing the expected utility of their choices. Essential for understanding decision-making under risk.
Affect Heuristic
A mental shortcut where current emotions influence decisions, often bypassing logic and reasoning. Important for understanding how emotions impact user decisions, aiding in more effective design and marketing.
Opportunity Cost Neglect
A cognitive bias where individuals overlook or underestimate the cost of opportunities they forego when making decisions. Crucial for understanding user decision-making behavior and designing systems that highlight opportunity costs.
Bounded Rationality
A concept that humans make decisions within the limits of their knowledge, cognitive capacity, and available time, leading to satisficing rather than optimal solutions. Crucial for designing systems and processes that account for human cognitive limitations and decision-making processes.
Prospect Theory
A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known. Crucial for understanding decision-making under risk and designing systems that align with user behavior.
Escalation of Commitment
A cognitive bias where individuals or organizations continue to invest in a failing project or decision due to the amount of resources already committed. Important for designers to recognize and mitigate their own risks of continuing unsuccessful initiatives.
Hyperbolic Discounting
A cognitive bias where people disproportionately prefer smaller, immediate rewards over larger, later rewards. Important for understanding and designing around user decision-making and reward structures.
Risk-as-Feelings Theory
A theory that emphasizes the role of emotions in risk perception and decision-making, where feelings about risk often diverge from cognitive assessments. Important for designing systems that account for emotional responses to risk and improve decision-making.
Relativity
A principle often used in behavioral economics that suggests people evaluate options based on relative comparisons rather than absolute values. Important for understanding decision-making and designing choices that highlight beneficial comparisons.
Optimism Bias
A cognitive bias that causes people to believe they are less likely to experience negative events and more likely to experience positive events than others. Crucial for understanding user risk perception and designing systems that account for unrealistic optimism.
Preference Reversal
A phenomenon where individuals' preferences between options change when the options are presented in different ways or contexts. Important for understanding and designing around inconsistencies in user choices.
Decoy Effect
A cognitive bias where consumers change their preference between two options when presented with a third, less attractive option. Useful for designers to create choice architectures that effectively influence user decisions.
Reference Dependence
A cognitive bias where individuals evaluate outcomes relative to a reference point rather than on an absolute scale. Essential for understanding decision-making and consumer behavior.
Scarcity Principle
The economic theory that suggests limited availability of a resource increases its value, influencing decision-making and behavior. Important for creating urgency and increasing perceived value in marketing.
Discounted Utility
A concept in behavioral economics that describes how future benefits are perceived as less valuable than immediate ones. Important for understanding user preferences and designing experiences that account for time-based value perceptions.
CoD
Cost of Delay (CoD) is a metric that quantifies the economic impact of delaying a project, feature, or task. Important for making informed decisions about project prioritization and resource allocation.
Probability Matching
A decision-making strategy where individuals allocate resources proportionally to the probability of an outcome occurring, rather than optimizing the most likely outcome. Important for understanding decision-making behaviors and designing systems that guide better resource allocation.
Representativeness
Representativeness is a heuristic in decision-making where individuals judge the probability of an event based on how much it resembles a typical case. Crucial for understanding biases in human judgment and improving decision-making processes.
Fast and Frugal Heuristics
Decision-making strategies that use simple heuristics to make quick, efficient, and satisfactory choices with limited information. Important for designing user experiences that support quick and efficient decision-making.
Sunk Cost Fallacy
The tendency for individuals to continue a behavior or endeavor as a result of previously invested resources (time, money, or effort) rather than future potential benefits. Important for understanding decision-making biases and designing systems that help users avoid irrational persistence.
Dual Self Model
A behavioral economics model that explains decision-making as a conflict between a present-oriented "doer" and a future-oriented "planner". Useful for understanding user decision-making and designing interventions that balance short-term and long-term goals.
Homo Economicus
A theoretical concept in economics that portrays humans as rational and self-interested agents who aim to maximize their utility. Important for understanding economic decision-making and designing systems that align with rational behavior.
Availability Heuristic
A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision. Crucial for understanding how people make decisions and the biases that influence their choices.
Choice Architecture
The practice of organizing the context in which people make decisions to influence the outcomes, often used to nudge users towards certain behaviors. Crucial for designing user experiences that guide decision-making and improve outcomes.
Myopic Loss Aversion
A cognitive bias where individuals tend to avoid risks when they perceive potential losses more acutely than potential gains. Important for understanding decision-making behavior in users and designing systems that mitigate risk aversion.
Cold States
Emotional states where individuals are calm and rational, often contrasted with hot states where emotions run high. Important for understanding decision-making processes and designing experiences that accommodate both states.
Gambler’s Fallacy
A cognitive bias where individuals believe that past random events affect the probabilities of future random events. Important for designers to understand user decision-making biases related to randomness.
Subadditivity Effect
A cognitive bias where the total probability assigned to a set of events is less than the sum of the probabilities assigned to each event individually. Important for understanding how users estimate probabilities and make decisions under uncertainty.
Behavioral Finance
The study of how psychological influences affect financial behaviors and decision-making. Essential for understanding and influencing financial decision-making and behavior.
Winner’s Curse
A phenomenon where the winner of an auction tends to overpay due to emotional competition, leading to a less favorable outcome than anticipated. Important for understanding decision-making biases and designing systems that mitigate overbidding risks.
Decision Theory
The study of how individuals make choices among alternatives and the principles that guide these choices. Important for designing decision-making processes and interfaces that help users make informed choices.
Regret Aversion
A tendency to avoid making decisions that might lead to regret, influencing risk-taking and decision-making behaviors. Crucial for understanding decision-making processes and designing systems that minimize regret.
Intertemporal Choice
The study of how people make choices about what and how much to do at various points in time, often involving trade-offs between costs and benefits occurring at different times. Crucial for designing systems that account for delayed gratification and long-term planning.
Information Bias
A cognitive bias where people seek out more information than is needed to make a decision, often leading to analysis paralysis. Crucial for designing decision-making processes that avoid information overload for users.
Decision Architecture
The design of environments in which people make decisions, influencing their choices and behaviors. Important for creating user experiences that guide decision-making processes effectively.
Omission Bias
A cognitive bias where people judge harmful actions as worse, or less moral, than equally harmful omissions (inactions). Important for understanding user decision-making and designing systems that mitigate this bias.
Certainty Effect
A cognitive bias where people give greater weight to outcomes that are certain compared to those that are merely probable. Important for designers to consider how users weigh certain outcomes more heavily in their decision-making.
Overconfidence Effect
A cognitive bias where a person's subjective confidence in their judgments is greater than their objective accuracy. Crucial for understanding user decision-making and designing systems that account for overconfidence.
Hot Hand Fallacy
The mistaken belief that a person who has experienced success in a random event has a higher probability of further success in additional attempts. Crucial for understanding and designing around user decision-making biases.
Paradox of Choice
The phenomenon where having too many options leads to anxiety and difficulty making a decision, reducing overall satisfaction. Important for designing user experiences that balance choice and simplicity to enhance satisfaction.
Focusing Effect
A cognitive bias where people place too much importance on one aspect of an event, causing errors in judgment. Important for understanding decision-making and designing interfaces that provide balanced information.
Pseudocertainty Effect
A cognitive bias where people perceive an outcome as certain while it is actually uncertain, based on how information is presented. Crucial for understanding and mitigating biased user decision-making.
Overchoice
The phenomenon where having too many options leads to decision-making paralysis and decreased satisfaction. Crucial for understanding and designing user interfaces that avoid overwhelming users with choices.
Bye-Now Effect
The tendency for people to defer purchasing decisions to a later time, often leading to procrastination. Important for understanding consumer behavior and optimizing sales strategies.
Zero-Risk Bias
A cognitive bias where people prefer the option that seems to eliminate risk entirely, even if another option offers a greater overall benefit. Important for understanding decision-making and designing risk communication for users.
Numerosity Bias
The tendency to perceive a greater quantity as a better value, regardless of the actual utility. Important for understanding consumer behavior and designing effective marketing strategies.
Pseudo Set Framing
The cognitive bias where people treat a set of items as more significant when they are perceived as a cohesive group. Important for understanding user perception and decision-making.
Framing Bias
A cognitive bias where people's decisions are influenced by how information is presented rather than just the information itself. Crucial for designers to minimize bias in how information is presented to users.
Regressive Bias
A cognitive bias where individuals overestimate the likelihood of extreme events regressing to the mean. Crucial for understanding decision-making and judgment under uncertainty.
Present Bias
A cognitive bias where individuals give stronger weight to payoffs that are closer to the present time compared to those in the future. Important for understanding user time-related decision-making and designing systems that encourage long-term thinking.
Loss Aversion
A cognitive bias where the pain of losing is psychologically more powerful than the pleasure of gaining. Important for designing user experiences that account for and mitigate loss aversion.
Diversification Bias
A cognitive bias where people prefer a greater variety of options when making simultaneous choices compared to sequential choices. Important for designers to consider user preferences for variety when designing choice architectures and product offerings.
MINDSPACE
Messenger, Incentives, Norms, Defaults, Salience, Priming, Affect, Commitment, and Ego (MINDSPACE) is a framework used to understand and influence behavior. Crucial for designing interventions that effectively influence user behavior.
Impact Bias
The tendency to overestimate the duration or intensity of the emotional impact of future events. Important for understanding user expectations and satisfaction.
Nudging
The act of designing and implementing subtle interventions to influence behavior in a predictable way. Crucial for guiding user behavior effectively without limiting freedom of choice.