Behavioral Economics Concepts

Behavioral Economics

• The study of how economic factors influence human behavior

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

• A branch of economics focused solely on market trends

• The analysis of financial markets using statistical methods

Costs that have already been incurred and cannot be recovered

• Sunk Costs

• Opportunity Costs

• Fixed Costs

• Variable Costs

Loss Aversion

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

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

• The tendency to ignore both gains and losses when making decisions

• The tendency to prefer certain outcomes over probabilistic ones

Cognitive Bias

• A subconscious error in thinking that leads to irrational decision making

• A conscious choice made after careful consideration

• A logical reasoning process that ensures accurate conclusions

• A method of decision making based on statistical analysis

Hedonic Adaptation

• The ability to maintain a high level of happiness regardless of circumstances

• The tendency to return to a baseline level of happiness regardless of experiences

• The process of becoming happier over time due to positive experiences

• The phenomenon of experiencing increased happiness after negative events

Overconfidence Bias

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

• The belief that one is less likely to experience negative events than others

• The inclination to underestimate the time needed to complete tasks

• The tendency to overestimate the accuracy of one's beliefs

Confirmation Bias

• The tendency to seek out information that contradicts our beliefs

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

• The tendency to make decisions based on emotions rather than facts

• The tendency to overestimate the accuracy of our own knowledge

Endowment Effect

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

• The tendency to undervalue things you do not own

• The tendency to overvalue future gains

• The tendency to ignore past losses

Overplacement

• A belief that one is worse than others

• When a person mistakenly believes they are better than others

• An accurate assessment of one's abilities

• A form of self-deprecation

The use of social media platforms and websites to promote a product or service

• Social Media Marketing

• Digital Advertising

• Content Creation

• Email Marketing