Behavioral Economics and Consumer Decision Making

These flashcards cover key concepts of behavioral economics, cognitive biases, dark patterns, and consumer decision-making strategies.

Behavioral Economics

The subfield of economics that applies psychological insights into human behavior and explains economic decision making.

Cognitive Bias

A subconscious error in thinking that leads to irrational decision making.

Confirmation Bias

The tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence.

Endowment Effect

The tendency to put more value on things you already own.

FOMO (Fear of Missing Out)

The tendency to feel anxiety or fear that an exciting or interesting event may currently be happening elsewhere.

Hedonic Adaptation

The tendency to return to a baseline level of happiness regardless of positive or negative experiences.

Herd Mentality

The tendency to conform to the behaviors and beliefs of others.

Loss Aversion

The tendency to regard losses as considerably more important than gains of comparable magnitude.

Overconfidence Bias

The tendency for people to be more confident in their own abilities.

Overestimation

When a person believes they are better at something than they actually are.

Overnight Test

A strategy to combat loss aversion by imagining an owned item replaced with cash and deciding which to prefer.

Overplacement

When a person mistakenly believes they are better than others.

Overprecision

When a person has an exaggerated certainty that an answer is correct

Social Media Marketing

The use of social media platforms and websites to promote a product or service.

Sunk Costs

Costs that have already been incurred and cannot be recovered.

Sunk Cost Fallacy

The tendency to finish something even though you might not want to because you paid for it

Authority Bias

The tendency to attribute greater accuracy to the opinion of an authority figure (unrelated to its content) and be more influenced by that opinion

Bait and Switch

A dark pattern that makes you think you are taking a specific action, but a different, undesirable action takes place instead

Browser Extension

A software application that adds functionality to a web browser.

Buy Nothing Project

A global network encouraging the recycling or giving away of consumer goods instead of purchasing new ones.

Comparison Shopping

The process of comparing factors for a product or service before making a purchase.

Commitment and Consistency Bias

The tendency to keep prior commitments and stay consistent with our previous decisions.

Confirmshaming

A dark pattern where declining an offer is worded to shame the user into compliance.

Consumer

A person who purchases goods and services for personal use.

Dark Patterns

Website design features intended to trick users into actions that benefit the business.

Data Breach

An event where a company's security fails, exposing personal information to hackers.

Disguised Ads

Ads that are hidden as other content to induce clicks.

Drip Pricing

The practice of initially showing consumers a lower price and then revealing additional fees at the time of payment

Federal Trade Commission (FTC)

A government organization that protects consumers and prevents unfair business practices.

Forced Continuity

A dark pattern where a free trial ends and charges begin without warning.

Friend Spam

A dark pattern where a service uses social media permissions or your email to send unsolicited messages to your contacts pretending to be you.

Gamification

The use of game design elements to encourage more spending on a website or app.

Hidden Fees

Additional charges that are not disclosed at the time of purchase.

Identity Theft

When someone steals personal information to commit fraud.

Influencer

A person who generates interest in products through social media.

Installment Plan

A payment method that allows purchases to be paid over time with interest.

Investment Scam

A scam involving fake investment opportunities, often in cryptocurrency.

Liking Bias

The tendency to favor those we like or are affiliated with.

Misdirection

A dark pattern that distracts attention from important information.

Multi-level Marketing Company (MLM)

A business model where sales representatives earn from their own sales and those of recruits.

Phishing Scam

A scam where personal information is requested via illegitimate emails.

Price Comparison Prevention

A dark pattern in which a retailer makes it hard for you to compare the price of an item with that of another similar item so you cannot make an informed decision

Price Matching

A practice where retailers match a competitor's lower price for an item.

Privacy Zuckering

A dark pattern tricking consumers into sharing excessive personal information.

Pump and Dump Scam

A scam where investors artificially inflate an asset's price before selling it.

Pyramid Scheme

An illegal model where profits come from recruiting others rather than selling a product.

QR Code Scam

A scam directing users to fake websites via a QR code.

Reciprocity Bias

The tendency to respond in kind to actions taken by others.

Roach Motel

A dark pattern that makes it easy to get into a service but hard to cancel.

Romance Scam

A type of scam in which an online relationship is built and then money is requested

Scam

An illegal trick aimed at obtaining money or information.

Scarcity Bias

The tendency to view scarce items as more valuable.

Shopping Scam

A scam where a purchased item does not arrive.

Social Proof Bias

The tendency to act according to the behavior of others.

Sneak Into Basket

A dark pattern in which a website sneaks an additional item into your basket somewhere in the online purchasing journey, often through the use of an opt-out button or checkbox on a prior webpage

Software as a Service (SaaS)

A business model charging regularly for access to online services.

Thrifting

Purchasing second-hand goods either in person or online.

Trick Question

A question that misleads the reader about its intent.

2-Factor Authentication (2FA)

An extra security layer requiring two pieces of information for account access, such as a password and then a confirmation code sent to your email.

Unit Price

The cost per item or measurement to easily compare similar products.

Ways of Influence

Factors such as authority, liking, or scarcity that have an effect on the way we make decisions

Who can be affected by Identity Theft?

Anyone

Why might people fall for a scam?

Sometimes the offer seems too good to give up, especially of they’re getting something out of it and they may not recognize the signs of deception or the potential risks involved.

How can you protect your identity?

Check your bank account more regularly, freeze your credit, use identity protection software, 2 factor authentication, and frequently change your passwords.

1. What type of ID theft occurs MOST often for people age 19 and under? How does this compare to the most common type of ID theft for the 20-29 and 30-39 age groups?

For people 19 and under, the most common type of ID theft is Employment or Tax-Related Fraud. For people 20-29 and 30-39 age groups, the most common type of ID theft is credit card fraud.

How can social media influence the way you spend money?

Social media can influence spending by creating FOMO (fear of missing out), showcasing trends, and enabling targeted advertising which encourages impulsive purchases.

What are some indicators that something might be a scam?

The urgent need for money and asking for personal information(Social Security, date of birth, credit card info.). Also grammar or misspelled words and “http” instead of “https”.

What should you do if you are a victim of identity theft?

You should file an identity theft report with the FTC(Federal Trade Commission)

How can FOMO make people go into debt?

People are more willing to spend money to keep up with the people around them.

If you make a credit card purchase and never received a confirmation for your order then find out you’ve been scammed, what should you do?

Contact your credit card company and try to reverse the transaction and get your money back.

How can freezing your credit help protect your identity?

It blocks your credit information to help prevent someone from opening accounts in your name.

What is the difference between a pyramid scheme and a multi-level marketing company?

Pyramid schemes do not sell products and value recruitment over sales. Multi-level marketing companies will provide a product to its customers.

What is the difference between traditional economics and behavioral economics?

Traditional economics believe that people will think rationally and will make the right decision while behavioral economics believe that people do not always behave rationally.