The 10 Behavioral Economics Concepts You Need To Know (And How To Apply Them). Thank YOU! Behavioral Economics: Human Truth in Action Merriam-Webster defines economics as “a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” Given this description, appending the adjective “behavioral” would seem redundant. The most common framing draws attention to either the positive gain or … [12:21] An easy way to think about framing is thinking about how a beautiful frame impacts a picture compared to no frame at all, or a cheap looking frame. [42:56] Some of the most misleading terms in real estate and what they mean. 118. [46:05] All the adjectives included into a description could be considered the frame. August 19, 2020. This is also called Prospect Theory. [35:33] Think back to episode 11 on Anchoring and Adjustment, when I asked you if there are more or less than 10,000 emperor penguins in Antarctica. 30. [44:25] This is also getting into the concept of PRIMING – which is going to be the topic of episode 18. [28:35] People choose options that are framed in a positive light. Grabbing coffee. Studies suggest that framing a choice in a positive way is more likely to increase immunisation take-up rates. Automatic enrolment in pensions - a successful behavioural nudge? Cozy mean small. Have you ever heard commercials for Chevron with Techron? These deviations from rational calculation are introduced as “non-standard” (the standard being neoclassical economics) or reflections of “bias”. How to Decode Real Estate Ads. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Tell me a little about your event (name, dates, attendee, budget, etc.) on 16. For example, businesses often run into planning errors and delays because of a failure to account for less salient aspects of their operations such as administrative tasks or … An important framing effect is illustrating the potential for loss. [21:48] Framing something as a loss is more likely to get someone to take an action than framing it as a gain. In the past few weeks, I have covered foundational topics like loss aversion, anchoring & adjustment, relativity, scarcity, and availability. Behavioral economics draws on psychology and economics to explore why people sometimes make irrational decisions, and why and how their behavior does not follow the predictions of economic models. The Framing effect is when our decisions are influenced by the way information is presented. Labour markets: How useful are ratings in the Gig Economy? [14:44] Why does the frame matter? Experiments are used to help understand how and why markets and other exchange systems function as they do. I guarantee Master Your Mindset will help you uplevel your mindset and bolster your business strategies. [22:58] Examples of framing coming into play. [32:22] The three different categories of framing: [34:18] . Let’s consider two examples to illustrate this behavioral bias. Boston Spa, Offering undergraduate and graduate programs, The Department of Economics at the University of Michigan champions the view that the cutting-edge theoretical and empirical methods of economics can and should be used for understanding and improving the world in which we live. Loss in more significant than gain. Framing effect | BehavioralEconomics.com | The BE Hub. Some researchers have suggested that this effect results from unconscious emotional reactions. We assume that Techron is something valuable, but it’s actually a name that Chevron made up. The phrasing, or how an investment is “framed”, can cause us, as investors, to change our conclusions about whether the investment is good or bad. Behavioral economics seems to have captured the popular imagination. [24:09] Last week, I talked about the US open. All of this other stuff makes a huge difference. Charming means old. You don’t want to miss out on these behavioral economics concepts – and tips for how to apply them in your business. Framing biases affecting investing, lending, borrowing decisions make one of the themes of behavioral finance. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas. Equivalent information can be more or less attractive depending on what features are highlighted.