BE101x: Glossary

BEHAVIOURAL INFLUENCES AND HEURISTICS

BEHAVIOURAL INFLUENCES

Status Quo

An individual’s preference to maintain their current state even if a change in their circumstances would provide better options.

Endowment Effect

The inclination to value and pay more for an item that is already in possession than for an item that has yet to be attained.

Loss Aversion

A tendency of individuals to be more attuned to losses than to gains.

Confirmation Bias

A predisposition to accepting information that confirms one’s opinions or conclusions rather than information that is contradictory.

Mental Accounting

Money is mentally allocated to several “accounts” such as clothing or entertainment rather than being perceived as fungible.

Willpower

The fact that individuals only have a certain amount of willpower at any given time and that willpower needs to be replenished periodically.

Hyperbolic Discounting

To value benefits that are reaped now more than benefits reaped in the future. Consequently, costs that are paid in the future are not felt as deeply as costs that are paid now.

Choice Overload

The presence of too many choices for a particular decision, making it difficult to evaluate and decide.

Information Overload

The presence of too much information in the environment, preventing the individual from evaluating and making a good decision.

HEURISTICS

Availability Bias

Information that readily comes to mind is used to make a decision rather than using a comprehensive set of facts that evaluates all options.

Representativeness

The use of similar attributes to judge the likelihood of an event occurring. This is in contrast to using a more comprehensive approach that would utilize statistics (e.g., base rates) to determine likelihood.

Anchoring and Adjustment

To make an estimate by applying adjustments to a particular reference value (i.e., the “anchor”).

Social Proof

When an individual looks to the behaviour of their peers to inform their decision-making, and their tendency to conform to the same behaviour their peers are engaged in.