Behavioural Economics: A closer Look At Decision Making - chapter 8

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10 Terms

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time inconsistent

A(n) person is neither irrational or rational.

2
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Time inconsistency

when people change their minds about what they want simply because of the timing of the decision.

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implicit cost of ownership

The is the cognitive bias documented by behavioural economists that leads people to value things more once they possess them.

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commitment device

strategy or tool that allows people to place restrictions on later choices now so they can make better decisions in the future

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sunk costs

costs that have already been incurred and cannot be recovered or refunded

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Fungible

easily exchangeable or substitutable

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overvalue

If the benefit you get from a good is concrete and immediate, you will it

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undervalue

If the benefit you get from a good is abstract and distant good, you will it

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undervaluing

People are prone to opportunity costs that are non-monetary

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true

(T/F) Are commodities fungible?