Behavioral Economics

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You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?

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Fear of Missing Out (FOMO)

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Behavioral economics is …

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The study of how irrational factors affect individual’s economic decisions

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Guy bought tickets to a concert but there is a bad snow storm. He decides to go anyway because he paid for it. This is

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Sunk Cost Fallacy

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Ally signs up for a Netflix trial. Because she “owns” a full account, she places high value on it and signs up. This is

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The Endowment Effect

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Peter can choose from two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of

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Loss Aversion

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Paula sees her friends' pictures of a concert that she couldn't attend because of work. She feels like an outsider.

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Paula is experiencing Fear of Missing Out (FOMO)

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Which of the following is an example of loss aversion? Selling your house at a loss to find a better investment opportunity, Believing that your house is worth more than it is because you own it, Deciding against selling your house below what you purchased it for, Only looking at sources that reinforce a higher selling value for your home

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Deciding against selling your house below what you purchased it for

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Confirmation bias is …

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The tendency to seek out information that supports our existing beliefs

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People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off.

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This is an example of Hedonic Adaptation

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An example of YOLO can be ...

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Spending money on a trip even when you didn't budget