Behavioral Economics Vocabulary

Behavioral economics

• systematic error in thinking

• helps make the difference between rational and irrational decisions

• economic decisions that determine your behavior

• things you buy based on your mood or emotions

Cognitive Bias

• decision making

• systematic error in thinking that affects judgements and decisions

• makes you decide if what your buying is rational

• mistakes digitally

Confirmation Bias

• only confirming what we want to believe or think thats true

• confirming every question you think

• information that solves formulas

• thinking every question we have is true

Endowment Effect

• owning things that cost more than they should

• the tendency to put more value on things you don't own

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

• buying everything because there is always sales

FOMO

• events that cost money and are cheap

• fear of missing out without spending a certain amount of money

• exciting or interesting events that you get to attend with your friends for free

• the fear of missing out on exciting or interesting events

You often spend more money due to FOMO

• True

• False

You spend less amount of money than usually due to FOMO

• True

• False

Loss Aversion

• the type of thinking that makes us thinking of what we will lose rather than what we will gain

• loosing something thats value but having to pay a small amount for it back

• loss that we dont look into

• gaining more; loosing less

Sunk costs

• expenses that have already been paid off after a long period of time

• costs that have been overdue

• Costs that have already been incurred and cannot be recovered

• Money that sunk overseas

Sunk Cost Fallacy

• Sticking with something we've already put our time, money, and/or effort in

• something we've invested in was unsuccessful

• puting time, money, and effort in something

• a cycle of repeated decisions economically