NGPF Unit 1 - Behavior Economics Review

This shows how psychological, social, and cognitive factors influence people's decision-making, often deviating from traditional economic assumptions of rationality.

• Economics
• Psychology
• MacroEconomics
• Behavior Economics

Cognitive Bias

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

Confirmation Bias

• Our underlying tendency to notice and focus on things that already fit our beliefs
• The concept of placing more value on an item when we own it
• The belief that our abilities are better than they actually are
• An error in the way we think that can influence our decisions

Endowment Effect

• Our underlying tendency to notice and focus on things that already fit our beliefs
• The belief that our abilities are better than they actually are
• The tendency of people to value items that they own more highly than if they did not belong to them
• When the government gives money to small businesses to stimulate growth

FOMO

• Fear Of Monster Orangutans
• Fear of Missing Out
• Florida Oranges Mock Ostriches
• Fear of making oreos

Hedonic Adaptation

• The suggestion that our brains seek out new experiences
• Doing only what "feels" good to do, not what is good
• Following the trends of what everyone else does
• None of the above

Bandwagon Effect

• Cowboys Fans and Warriors Fans
• The habit of doing what you want because it feels good
• The habit of adopting certain behaviors or beliefs because may others do the same
• Doing things on your own for your own well thought out reasons

This describes how our decision making gets worse as we make additional choices, causing our cognitive abilities to get worn out.

• Decision Fatigue
• Cognitive Bias
• Decision Quanitity
• Declinism

This is the process of attaching a reward to a given behavior

• Bribing
• Incentivization
• Institutionalization
• Motivation

This is when our memories of a specific time, place, or things can cause us to spend money on things that remind us of that thing. Ex: You really need to save some money, but you come across your favorite childhood snack that you have not seen in a long time.

• Cognitive Bias
• Bandwagon Effect
• Nostalgia Effect
• Endowment Effect