14/06/2010BE Knowledge Centre: Basic Definitions

Useful glosses of the key terms used in Behavioural Economics. Clicking within entries will take you to some helpful places!

 

Behavioural Economics


Wikipedia - a very useful central article that spiders out to many useful definitions

Definition from the Concise Encyclopedia of Economics and authored by Richard Thaler, no less.

Interesting points of criticism in this wikipedia entry



Loss Aversion — how the desire to avoid losses crowds out gains


Endowment Effect
— how owning something increases its apparent value

Chunking — the psychology behind why simple tasks are easier than complex ones

Prospect Theory — Kahenman & Tversky’s grand theory designed to bring their work on heuristics together

Status Quo Bias — the influence the desire to see things stay the same plays

Gambler’s Fallacy — the most famous example of poor probability reason and confusion over causation

Self-serving bias — the tendency to only notice evidence that supports one’s case, while conveniently over-looking evidence to the contrary


Money Illusion
— the tendency to concentrate on nominal number values over real-spending power or economic value

Framing Effect — the central psychology effect that means that identical conditions can be made to ‘feel’ different.

Mental Accounting — the influence of ring-fencing, labeling and tagging certain funds of money for specific purposes.