12_3 Cognitive Bias in Behavior Economics

Multiple Choice

IN LEADERSHIP THERE ARE THREE THINGS THAT ARE IMPORTANT,

COMPENTENCE, CHARACTER AND....

• COOPERATION

• CHEMISTRY

• COLLABORATION

NGPF Activity Bank

Behavioral Economics

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Last updated: 10/17/22

Multiple Choice

Your Core Values will Change Over Your Lifetime

• For the most part, Yes

• For the most part No

MR. WINBORNE

Don't Put All Your Beans in One Basket

THE BEAN GAME REVISITED

Poll

How many of your 20 beans are you willing to spend on Housing?

• Living with family, sharing the cost of utilities. (2 Beans)

• Share an apartment with roomates.

  (3 beans)

• Rent your own place.

  (4 Beans)

Poll

How many of your 20 beans are you willing to spend on food?

• Cook at Home, dinner out once a week. (2 Beans)

• Frequent fast food lunches and weekley dinner out. (3 beans)

• All meals away from home. (4 beans)

Poll

Clothing

• Wear present wardrobe. (0 Beans)

• Shop at discount or thrift stores (1 bean)

• Shop for new clothes (2 beans)

• Shop for designer clothes. (4 beans)

Poll

Transportation

• Walk or Bike *0 Beans

• Ride bus or join carpool. (1 bean)

• Buy fuel for family car. (2 beans)

• Buy a used car and gas (3 beans)

• Buy a new car and gas (4 beans)

Poll

Communication:

• No Phone *0 Beans

• Phone with limited data *1 bean

• Phone with unlimited data *2 beans

• Wifi at your home. *1 beans

Poll

Personal Care:

• Basic products, toothpaste, soap, shampoo, make-up, etc. *0 Beans

• Ocassional professional haircuts, basic personal products *2 beans

• Regular hairstyling, nails, name brand personal care products. *3 beans

Poll

Gifts:

• Make your own. *1 Bean

• Purchase cards or small gifts occasionally *2 beans

• Purchase frequent gifts for family and friends *3 beans

• Contributions to charities and/or religious groups. *1 bean

Poll

Savings:

• Keep cash at a piggy bank at home. *0 Beans

• 5% of income *1 bean

• 10% of income *2 beans

• Invest for retirement *2 bean

Multiple Choice

What are social values, as they pertain to money?

• How you, personally, care and think about finances
• How your family, friends, and community members impact your feelings about money
• How companies and advertisement make you feel about money

Multiple Choice

Behavioral economics…

• Is a field of economics that studies people who make rational and objective decisions
• Tracks and examines stock market trends over a certain period of time
• Combines economics and psychology to study why people behave the way they do in the real world

Multiple Choice

What is the main idea behind behavioral economics?

• Humans are emotional and impulsive

• Humans are perfectly rational beings

• Humans always make the best financial decisions

• Humans make predictable financial mistakes

Multiple Choice

What is the name of Richard Thaler's research?

• Predictable Money Mistakes

• Behavioral Economics

• Dumb Stuff People Do

Multiple Choice

Which of the following is TRUE about cognitive biases?

• It is easy to recognize when cognitive biases are influencing our own decisions
• There are only a handful of cognitive biases that exist
• Awareness is often the first step to overcoming the influence of a cognitive bias

NGPF Activity Bank

Behavioral Economics

www.ngpf.org

Last updated: 10/17/22

Multiple Choice

What is mental accounting?

• Refusing to sell something for more than its worth

• Separating money into imaginary categories

• Assigning more value to things we already own

Multiple Choice

What is transaction utility?

• Refusing to sell something for more than its worth

• The mental pleasure or pain from feeling like you paid less or more than something's worth

• Feeling the need to get 'your money's worth'

Multiple Choice

You go to a restaurant and order a big meal. Even though you’re full, you keep eating because it was expensive. This is an example of...

• a. Mental Accounting
• b. The Sunk Cost Fallacy
• c. Fear of Missing Out

Multiple Choice

Andrew wants to buy a specific model of a new car. He conducts research and finds many resources that highlight the benefits of that car model. Which cognitive bias might be influencing Andrew’s decision making?

• Confirmation Bias
• Hedonic Adaptation
• The Sunk Cost Fallacy
• Overconfidence

Multiple Choice

Everyone has some type of bias, whether unconscious or cognitive.

• True

• False

Multiple Choice

Cognitive Bias is...

• a. An error in the way we think that can influence our decisions
• b. The desire to seek out information that confirms our existing beliefs
• c. The belief that our abilities are better than they actually are
• d. The concept of placing more value on an item when we own it

Multiple Choice

Richard Thaler, who wrote the book Misbehaving said people can make

better financial decisions if they ...

• are able to go with their gut.

• are aware of their behavioral biases.

• are aware of the flow of the

  stock market

• are aware of assumed misconceptions

  about dollars and cents.

Multiple Choice

The tendency to return to a baseline level of happiness regardless of whether you go through a positive or negative experience or event

• Cognitive Bias

• Hedonic Adaptation

• Overconfidence Bias

• Endowment Effect

Multiple Choice

What is FOMO

• It's a mental health issue

• is associated with a range of

  negative thinking that

  can cause emotional anxiety.

• It is a lack of self-esteem

Multiple Choice

Sunk Cost Fallacy ...

• is a strategy for making good decisions.

• leads people to continue to invest in

  a project or decision when things

  are going from bad to worse.

• is a tendency to make decision based on current cost.

Multiple Choice

The tendency to conform to the behaviors and beliefs of the people around you.

• Herd Mentality
• Confirmation Bias
• Sunk Cost Fallacy
• Endowment Effect
• FOMO

Multiple Choice

ENDOWMENT EFFECT MEANS I VALUE MY BELONGINGS BECAUSE THEY ARE MINE...

I VALUE THEM HIGHER... THAT THE ACTUAL VALUE... REMEMBER THE LOTTERY TICKET EXAMPLE.

• TRUE

• FALSE

Multiple Choice

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

• Loss Aversion

• Herd Mentality

• Overprecision

• The Endowment Effect

Multiple Choice

Loss Aversion is another Cognitive Bias...

• Focuses on the pain of losses. And they are usually greater than

  the joy associated with a gain.

• that help us make rational decisions

• that is no big deal when it comes

  to financial decisions.

Multiple Choice

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

• This is an example of the Endowment Effect

• This is an example of Confirmation Bias

• This is an example of Hedonic Adaptation

• This is an example of Herd Mentality

Multiple Choice

Andrew wants to buy a specific model of a new car. He conducts research and finds many resources that highlight the benefits of that car model. Which cognitive bias might be influencing Andrew’s decision making?

• Confirmation Bias
• Hedonic Adaptation
• The Sunk Cost Fallacy
• Overconfidence

Multiple Choice

How do behavioral economists view people differently than traditional economists?

• Behavioral economists believe people always make rational decisions based on self-interest.
• Behavioral economists consider people as consistently making decisions that maximize economic outcomes.
• Behavioral economists acknowledge that people make predictable mistakes.
• Behavioral economists think people are solely driven by external factors alone.

Multiple Choice

The tendency to put more value on things you already own.

• Herd Mentality
• Confirmation Bias
• Sunk Cost Fallacy
• Endowment Effect

Multiple Choice

While researching Apple, Remy tends to focus on positive stories about their profits instead of stories about poor sales

• Remy is experiencing the Endowment Effect

• Remy is experiencing Overconfidence Bias

• Remy is experiencing Confirmation Bias

Multiple Choice

75% of drivers believe that they are above average. What type of bias is this an example of?

• Overestimation

• Overconfidence

• Overprecision

• Overvaluing

Multiple Choice

There are more than 12 Cognitive Biases?

• True

• False

• Maybe