Behavioral Economics and Decision-Making Research

Limited Rationality is the idea that individuals make decisions based on bounded rationality, which is influenced by cognitive biases, heuristics, and emotions.

Heuristics are mental shortcuts that help individuals make decisions quickly and efficiently.

Confirmation Bias, Hindsight Bias, and Framing Effects are all examples of cognitive biases that influence decision-making.

Loss Aversion is the tendency for individuals to feel the pain of a loss more strongly than the pleasure of an equivalent gain.

Reference Point, Diminishing Sensitivity, and Loss Aversion are all key concepts in Prospect Theory.

Framing Effects are the influence of the way information is presented on decision-making.

The way a question is worded, the order in which options are presented, and the use of defaults are all examples of framing effects.

The Availability Heuristic is the tendency to rely on information that is easily accessible in memory.

Estimating the probability of an event based on how easily examples of that event come to mind, judging the frequency of a word based on how easily it is to recall, and using a recent event as a basis for making a decision are all examples of the availability heuristic.

Anchoring Bias is the tendency to use an initial piece of information as a starting point for making subsequent judgments.

Using the first price offered in a negotiation as a reference point, estimating the value of a house based on the asking price, and setting a budget for a project based on the initial cost estimate are all examples of anchoring bias.

Emotional Decision-Making is the tendency to make decisions based on emotions rather than logic.

Buying a product because it makes you feel good, choosing a job based on how it makes you feel, and making an investment decision based on fear of loss are all examples of emotional decision-making.

Social Decision-Making is the tendency to make decisions based on social norms and expectations.

Choosing a career path based on what is expected of you by your family, buying a product because it is popular among your friends, and voting for a candidate because they are from your political party are all examples of social decision-making.