Lesson 1 Behavioral Economics Vocabulary Review

The subfield of economics that applies psychological insights into human behavior and to explain economic decision making

• behavioral economics

• confirmation bias

• social media marketing

A subconscious error in thinking that leads to irrational decision making

• overestimation

• cognitive bias

• endowment effect

• FOMO

The tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence

• confirmation bias

• hedonic adaptation

• sunk cost

• loss aversion

The tendency to put more value on things you already own

• endowment effect

• sunk cost fallacy

• FOMO (fear of missing out)

• overplacement

The tendency to feel anxiety/fear that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on a social media website

• FOMO (fear of missing out)

• overnight test

• endowment effect

• hedonic adaptation

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

• hedonic adaptation

• overplacement

• overprecision

• social media marketing

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

• loss aversion

• herd mentality

• hedonic adaptation

• overestimation

The tendency to regard losses as considerably more important than gains of comparable magnitude

• loss aversion

• overconfidence bias

• sunk cost fallacy

• cognitive bias

The tendency people have to be more confident in their own abilities

• loss aversion

• overconfidence bias

• sunk cost fallacy

• FOMO (fear of missing out)

When a person believes they are better at something than they actually are

• overnight test

• overconfidence bias

• overplacement

• cognitive bias