behavioral endterm

behavioral economics LUISS

active choosing

synonym for required choice

channel factor

a small influence that can significantly facilitate or inhibit behavior.

collaborative filtering

recommended choices based on preferences of others with similar tastes.

compensatory strategy

evaluating options by considering all attributes and making trade-offs.

curation

selecting and organizing items (e.g. books) to create a valuable collection.

elimination by aspects

simplifying choices by setting minimum cut-offs for attributes and eliminating options.

expect error

designing systems that anticipate and forgive user mistakes.

Economic Rationality

A model of decision-making defined as the optimal choice that maximizes expected utility

bounded rationality

A concept introduced by Herbert Simon, stating that economic optimality relies on unrealistic assumptions . Humans instead have limited information, computational power, memory, time, and attention

satisficing

A decision strategy where an individual establishes an aspiration threshold and then stops searching once they find an option that meets it, rather than seeking the absolute optimum

System 1

a cognitive mode that is fast, parallel, automatic, effortless, associative, and often emotionally charged.

System 2

A cognitive mode that is slow, serial, controlled, effortful, and rule-governed. Its role includes monitoring and potentially overriding the intuitive impressions of System 1.

heuristics

mental shortcuts or rules of thumb that allow people to reach approximately correct solutions in a ‘‘cognitively economical’’ way.

bias

systematic errors or departures from rational decision-making that can occur as unintended side effects of using heuristics.

accessibility

the ease with which particular mental contents come to mind; it is the core dimension used to analyse intuitive judgements.

attribute substitution

a process where an individual evaluates a difficult target attribute (like probability) by substituting a more easily accessible heuristic attribute (like similarity or ease of recall)

representativeness

a heuristic where people judge probabilities based on the degree to which an object or event resembles a stereotypical category.

conjunction fallacy

The error of judging a specific, detailed scenario as more probable than a general one because the details make it seem more representative or plausible.

law of small numbers

the mistaken belief that small samples should be highly representative of the population or the random process that generated them.

gambler’s fallacy

The erroneous belief that chance is self-correcting, leading people to expect that a successful outcome is ‘‘due’’ after a run of bad luck.

hot hand

The perception that an athlete on a ‘‘scoring streak’’ is more likely to score again, despite trials being statistically independent.

availability

a heuristic where the frequency or probability of an event is estimated by the ease with which instances come to mind.

affect heuristic

A process where emotional evaluations (liking or disliking) are used as a basis for forming judgements about the risks and benefits of various objects or technologies.

anchoring and (insufficient) adjustment

A heuristic where an individual estimates a quantity by starting from a convenient initial value (the anchor) and then adjusting it, often insufficiently, to reach a final answer.

collective behaviours

Behavioural patterns shared by a group of individuals. Those can be both independent and interdependent.

independent behaviour

Actions determined by purely economic or natural reasons, carried out without regard for other people’s behaviour or beliefs (e.g., using an umbrella when it rains)

interdependent behaviours

actions where other people’s choices and opinions matter to one’s own choice.

preference

A disposition to act in a particular way in a specific situation; it is strictly connected to choice.

social preferences

Preferences that take into account the outcomes, beliefs, and behaviours of other people.

conditional preferences

Preferences that are contingent on what others do or think.

social expectations

Beliefs about others that influence behaviour. These can be either normative or empirical.

empirical expectations

Beliefs about how others will act or react in certain situations.

normative expectations

beliefs about what others think one ‘‘ought’’ to do (second-order beliefs)

reference network

The specific range of people an individual cares about when making decisions and setting expectations.

custom

A common behavioural pattern created by actors acting independently out of need or convenience (e.g., open defecation in areas without latrines)

descriptive norm

A pattern of behaviour that individuals conform to on the condition that they believe others in their reference network conform (empirical expectations).

social norm

A rule of behaviour where individuals prefer to conform on the condition that they have both empirical and normative expectations from their reference network.

injunctive norms

Collective beliefs about what ‘‘ought’’ to be done; these express social approval or disapproval

pluralistic ignorance

A cognitive state where members of a group dislike a norm but conform to it because they incorrectly believe others support it.

ultimatum game

A bargaining game where a Proposer makes a ‘‘take-it-or-leave-it’’ offer to a Responder regarding how to split a sum of money; if the responder rejects, both receive zero.

public good

A good whose consumption is non-rival (one person’s use doesn’t hinder another’s) and non-excludable (no one can be prevented from using it).

free-riding

benefiting from a public good without contributing to its provision

conditional co-operators

individuals who contribute more as the average contribution of their group increases.

strong reciprocity

A predisposition to cooperate and to punish violators of cooperative norms at a personal cost, even if those costs cannot be recouped.

battle of the sexes

a coordination game where two players have different preferred outcomes but both would rather coordinate than fail to reach any agreement.

choice architect

Anyone responsible for organizing the context in which people make decisions.

nudge

Any aspect of choice architecture that predictably alters behaviour without forbidding options or significantly changing economic incentives.

libertarian paternalism

A movement advocating for steering people’s choices in directions that improve their lives while still preserving freedom of choice.

econs vs. humans

A distinction between perfectly rational model agents (homo economicus) and real people with cognitive limitations (homo sapiens).

mapping

The relationship between a choice made and the ultimate welfare or consumption experience that follows.

elimination by aspects

A decision strategy for complex choices where one eliminates options that do not meet a cutoff level for the most important attribute, repeating the process of subsequent attributes.

Brunswick Lens Model

A framework representing judgement as an inference where an individual uses observable cues to assess an unoberservable truth.

clinical vs. actuarial judgement

Clinical judgement uses data to make a human prediction; actuarial judgement uses empirical relations to establish statistical predictions, which are often more accurate.

machine learning (ML)

Systems that learn patterns from data to make predictions without needing explicitly identified relevant variables.

target misspecification

When the variable predicted is not what the institution actually cares about.

proxy error

When a chosen target attribute imperfectly represents the real aim in a way that may disadvantage certain groups.

predictive parity

A fairness condition where the probability of an outcome is equal across different groups for the same algorithm risk score.