Module 5 - AEM 2020

Flashcards for studying key concepts in decision-making and behavioral economics.

Normative Decision-Making

One of the three types of decision-making.

Descriptive Decision-Making

One of the three types of decision-making.

Prescriptive Decision-Making

One of the three types of decision-making.

Improper Linear Model

A simple equal-weight linear model that often outperforms experts.

Confirmation Bias

A reason algorithms outperform experts; favoring information that supports existing beliefs.

Hindsight Bias

A reason algorithms outperform experts.

Temptation Bundling

Pairing a reward with a habit (e.g., Netflix + gym).

Emergency Skip Day

A health nudge that increased gym adherence most.

100% Fat Free

A food label that is more persuasive to consumers.

Social Comparison to Neighbors

The kind of feedback that most reduces home energy use.

Content (Disclosure Dimension)

One of the three disclosure dimensions.

Form (Disclosure Dimension)

One of the three disclosure dimensions.

Context (Disclosure Dimension)

One of the three disclosure dimensions.

Salience

Improves engagement with disclosures.

Mapping

Improves engagement with disclosures.

APR (Annual Percentage Rate)

The most important mortgage attribute to compare.

Endowment Effect

Overvaluing something simply because you own it.

Automatic 401(k) Enrollment

Uses defaults to overcome inertia.

$5/day > $150/month

How to frame savings to increase sign-ups.

Debt Snowball Strategy

Paying off small balances builds motivation.

Loss Aversion

Affects Social Security claims; more loss-averse people claim earlier.

Status Quo Bias

Preference for the current state of affairs.

Present Bias

Overvaluing immediate rewards over future ones.