VCE Economics U1 AOS3 2023-27

where consumer judgment is affected by an arbitrary starting value

• Anchoring effect

• Sunk cost

• Status quo bias

• Bounded rationality

when a decoy product is priced to make one of the other options much more attractive

• Asymmetric dominance

• Nudge

• Decoy option

• Framing

the idea that people often rely on easily recalled information, rather than actual data, when evaluating the likelihood of a particular outcome

• Availability heuristic

• Vividness

• Bounded rationality

• Present bias

a social science that aims to understand how and why people use their scarce resources the way they do in the real world through empirical observations

• Behavioural economics

• Neoclassical economics

• Psychology

• Philosophy

the idea that a consumer's ability to make consistently rational decisions is compromised by the availability of the information, the complexity of the decision and the brains' cognitive limitations and time constraints

• Bounded rationality

• Bounded self-interest

• Bounded willpower

• Bounded understanding

the idea that consumers are social beings and therefore care about fairness, and not always driven by narrow self-interest to maximise their personal benefit

• Bounded self-interest

• Bounded rationality

• Bounded willpower

• Bounded comprehension

the idea that consumers do not possess absolute self-control when confronted

• Bounded willpower

• Bounded self-interest

• Bounded rationality

• Bounded sentimentality

the phenomenon whereby consumers change their preference between two options when presented with a third option

• Decoy effect

• Anchoring effect

• Asymmetric dominance

• Framing

when neither the participants nor the experimenters interacting with participants are aware of who is subjected to the independent variable

• Double-blind experiments

• Blinded experiments

• Blinkered experiments

• Ignorant experiments

presenting information in a way that preys on people's emotions and vulnerabilities

• Emotional framing

• Statistical framing

• Anchoring effect

• Norms/herd mentality