Critiques of the Maximizing Behaviors

You are looking to purchase a used car, and find two similar models advertised in a newspaper. One of the cars is priced 5% lower than the other so you buy it, only to find out later that there are mechanical problems that now need repair. Assuming the car you did not purchase was in good condition, your choice was biased in: 

• framing

• using a rule of thumb

• anchoring

• availability

Answer explanation

This consumer was "anchored" by the original price being 5% off. This made it difficult for them to consider any other factors in their decision-making

A firm that advertises their product as something that ‘helps you be thinner’ instead of ‘helps you gain less weight’ is using the bias of

• framing

• a rule of thumb

• anchoring

• availability

Answer explanation

This firm is presenting the information that could be more impactful. Telling a consumer that they could be thinner is likely to be more impactful than telling them they'll gain "less weight," even though they essentially mean the same thing

A couple of months ago, your friends spoke very highly of a gaming console and you recall seeing advertisements for it on television. You finally manage to save enough money and decide to purchase it. It is possible you have made a poor decision due to your bias of:

• framing

• using a rule of thumb

• anchoring

• availability

Answer explanation

This decision was made with the most recent information "available" to you: ads on TV and your friend's recommendation

You are looking to purchase a used car. You look online to find that there are over twenty possible vehicles in your area that could meet your needs. Knowing you don’t have time to test drive all of the cars, you use some criteria to narrow down your choices to five. Which of the following best describes your behaviour?

• bounded selfishness

• bounded rationality

• bounded self-control

• utility maximization

Answer explanation

We are rational, up to a point because we lack the mental capacity to process large amounts of information.

Someone taking on debt to buy something they desire but do not really need and cannot reasonably afford could be described as:

• bounded selfishness

• bounded rationality

• bounded self-control

• utility maximization

Answer explanation

This illustrates our limits of self-control. Not much like homo economicus!

Buying a more expensive electric vehicle that provides no personal benefit to you compared to buying a less expensive gasoline-powered vehicle could be described as:

• bounded selfishness

• bounded rationality

• bounded self-control

• utility maximization

Answer explanation

Your purchase of an electric vehicle could be you looking out for the "greater good," by making more environmentally-friendly choices

Which of the following is not a type of nudge used within choice architecture?

• default choice

• personalized choice

• restricted choice

• mandated choice

Answer explanation

If you want to nudge me into buying something...make it come in purple.

Which of the following is not a possible goal of firms?

• satisficing

• growth maximisation

• revenue maximisation

• consumer utility maximisation

Answer explanation

Firms can't maximize a consumers on personal utility as this is a highly personalized experience