Behavioral Economics

You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?

• Herd Mentality

• Loss Aversion

• Hedonic Adaptation

• Fear of Missing Out (FOMO)

Behavioral economics is …

• The study of how rational people make economic decisions

• The study of how irrational factors affect individual’s economic decisions

• The study of how economies around the world interact with each other

• The study of how investors choose which stocks to buy and sell

Guy bought tickets to a concert but there is a bad snow storm. He decides to go anyway because he paid for it. This is

• Sunk Cost Fallacy

• Endowment Effect

• Overconfidence

• Herd Mentality

Ally signs up for a Netflix trial. Because she “owns” a full account, she places high value on it and signs up. This is

• Loss Aversion

• Herd Mentality

• Overprecision

• The Endowment Effect

Peter can choose from two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of

• Confirmation Bias

• Overconfidence

• Loss Aversion

• Fear of Missing Out (FOMO)

Paula sees her friends' pictures of a concert that she couldn't attend because of work. She feels like an outsider.

• Paula is experiencing Fear of Missing Out (FOMO)

• Paula is experiencing Herd Mentality

• Paula is experiencing Loss Aversion

• Paula is experiencing Confirmation Bias

Which of the following is an example of loss aversion?

• Selling your house at a loss to find a better investment opportunity

• Believing that your house is worth more than it is because you own it

• Deciding against selling your house below what you purchased it for

• Only looking at sources that reinforce a higher selling value for your home

Confirmation bias is …

• The tendency to seek out information that supports our existing beliefs

• The tendency to value something more because you own it

• The belief that we are better at something than we actually are

• The belief that we should do something because our friends are doing it

People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off.

• This is an example of the Endowment Effect

• This is an example of Confirmation Bias

• This is an example of Hedonic Adaptation

• This is an example of Herd Mentality

The Fear of Missing Out, or FOMO, is…

• The effect of feeling a loss more than an equal gain

• The anxiety that an interesting or exciting event is happening without you

• Placing higher value on things you own

• The opposite of YOLO (You Only Live Once)