Cognitive Economics

Cognitive economics primarily investigates how cognitive processes, such as perception, memory, attention, and reasoning, influence economic decision-making.

Bounded rationality recognizes that individuals have limited cognitive resources and make decisions based on simplified heuristics and rules rather than fully rational calculations.

Prospect theory proposes that individuals evaluate gains and losses relative to a reference point and exhibit different sensitivity to gains and losses.

Heuristics are mental shortcuts that individuals use to simplify decision-making by relying on rules of thumb and past experiences.

Recency bias refers to the tendency to place more emphasis on recent information and events, which can influence decision-making.

Confirmation bias describes the tendency to seek information that confirms existing beliefs and disregard evidence that contradicts them.

Anchoring bias occurs when individuals rely excessively on an initial piece of information as a reference point, which can influence subsequent judgments and decisions.

Framing effects refer to the influence of the way information is presented on individuals' choices and preferences.

Availability bias refers to the tendency to judge the likelihood of an event based on how easily examples of that event come to mind.

Hindsight bias describes the tendency to believe that one could have accurately predicted an outcome after it has already happened.

Mental accounting refers to the tendency to allocate money into separate mental accounts for different purposes, which can influence spending and saving behaviors.

Endowment effect describes the tendency to place a higher value on items that one already owns compared to items that one does not own.

Sunk cost fallacy describes the tendency to continue investing in a losing venture or project despite evidence that it is unlikely to succeed, due to the emotional attachment to the sunk costs.

Intuitive decision-making refers to the process of making decisions based on gut feelings, emotions, and past experiences rather than through conscious rational analysis.

Social preferences refer to the influence of social norms, values, and cultural factors on individuals' economic decisions and preferences.