Decision making by individuals and firms - Behavioural Economics - Irrational : an economist's view
8 important questions on Decision making by individuals and firms - Behavioural Economics - Irrational : an economist's view
What six mistakes do peoples' irrationality behavior typically stem from when they are making economics decisions?
2. Overconfidence
3. Unrealistic expectations about future behavior
4. Counting dollars unequally
5. Loss-aversion
6. Status quo bias
How does misperception of opportunity cost make people think irrationally when making a decision? how is it related to sunk cost?
- misperception of opportunity cost make people think irrationally when making a decision, by taking an opportunity cost into account when none actually exist
- A misperception of what exactly counts as opportunity cost, and what doesn't is the root cause of counting sunk cost when one makes a decision.
How does overconfidence make people think irrationally when making a decision? What is it a function of?
- Overconfidence can lead people to make a large spending, such as buying a car without understanding the benefits and the costs,
- they tend to remain overconfident because they remember their success and use overspending to remember only their success and forget their failures.
- overconfidence is a function of ego
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I immediately started to enjoy learning again, and my grades soared. All of a sudden, everything went better. I highly recommend Study Smart to all students..
Being able to create my materials online made the process of studying so much smoother and quicker. I no longer have to spend a huge amount of my time on creating my summaries.
At first, my notes were a mess. Now I use Study Smart to take my notes in a perfectly structured way. It helps me to save a lot of time and do other things I enjoy.
Students that study with Study Smart get better grades. The system applies all the learning methods in such a way that both well-performing students and students who struggle perform much better.
Hi Chris, I would like to thank you very much. Last year I scored C on a course, and this year I got an A+ thanks to your method! Thank you very much!
The largest effect is that my child is more enthusiastic about school! Every parent wants their children to be happy at school, Study Smart made it happen.
In high school, I failed several exams, and that has really changed now. I actually needed this tool very much back then. Since I started studying with StudySmart, I haven't had any D's. My average score is now an A and those are results I would have never had in the past
With my old method, I passed only 3 out of 8 courses. Since I started taking my notes digitally in Study Smart, I have passed all my courses on the first try. For me, StudySmart takes away the stress of wondering if I will pass or not.
Thanks to StudySmart, I passed all my exams, and with better grades than before! On top of that, I have mastered a very good study method now, which I am confident will help me earn my degree.
For my 1st exam I got a C. Then, I started looking for ways to learn better and I came across Study Smart. Since then I have scored a A+, A, A- and another A. I highly recommend it to everyone who wants to hear it. I am so happy with it!!
I was struggling to finish all my first-year subjects for 3 years. Then I discovered Study Smart, which helped me to finish all of them within 3 months.
Because of StudySmart, things are going well in many ways. Before, I always had study stress and no time for anything. Now I feel calm and confident (because of the program). I used to score a B, now I usually score an A or A+.
Hey Chris, I really want to thank you very much for developing the platform, I usually got around C for my exams, now I scored an A+, an A and a A- !!
Since using Study Smart, my average has increased significantly. I even completed a statistics course with a A+ while I'm bad at statistics. I took on extra courses this year, because of Study Smart. Thanks so much!
Ever since I started studying with StudySmart I passed all my exams !!! No more re-sits!! At first, I was happy with a pass and now I only get good grades. Many thanks!
I aced all the courses I studied with Study Smart. For law, I first scored a D, and now an A! I’m 100% sure that I’ll pass all the courses I study with Study Smart.
I always thought I studied well. My grades were fine. I could never have imagined that applying these study skills would have such a huge and direct impact on my grades, my speed and the pleasure I have in learning.
For the first time, I finally feel totally confident about the way I learn. I have the perfect overview and make great progress in terms of speed and the grades I get. Thanks, Chris!
How does Unrealistic Expectations about the future make people think irrationally when making a decision? And what is this behavior another form of?
- Irrationality that occurs when one is being overly optimistic about the future behavior.
- it is another form of overconfidence
How does counting dollar unequally makes people think irrationally when making a decision
this will lead to spending more by the account in which one feels like the dollar is not as valuable as the other.
this is called mental accounting
How do we define mental accounting? And what is the effect of mental accounting?
- mental accounting is the habit of assigning dollars in different accounts and making the dollars in one accounts worth more than the dollars in another account.
- the effects of mental accounting is that after the decision is made there is usually some for of regret
- because of the failure to understand that regardless of the form it comes with a dollar is a dollar
How does loss aversion make people think irrationally when making a decision? how is it related to sunk cost? Why?
- This lead to irrationality because it give a person an oversensitivity to loss, leading to a unwillingness to recognize a loss and move on.
- loss aversion can also explain why sunk cost are so hard to ignore
- because ignoring a sunk cost means recognizing that the money you spent is unrecoverable and therefore lost.
How does status quo bias make people think irrationally when making a decision?
when people don't make decisions about something that might be cause of they might regret a decision if made, so better let it be, even though the outcome is the same.
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