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Behavioral Economics

Published on Nov 23, 2015

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PRESENTATION OUTLINE

1.

Behavioral Economics

the 2-system brain and its shortcuts
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2.

"self"-interest

which self do I serve?
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3.

or this one?

the future "me" might have different wants/needs than the current me
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4.

econs vs. humans

5.

econs vs. humans

6.

COST-BENEFIT ANALYSIS

IS HARD WHEN FEEDBACK ISN'T IMMEDIATE
Photo by Hindrik S
7.

two systems

intuition vs. intentional
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8.

attention and effort

  • System 2 (intentional) motor requires more effort
  • Glucose and "ego" depletion- diminished self-control
  • Brain prefers to use System 1 when possible (intuition and association rather than critical thinking)
Photo by W. Visser
9.

Meet system 1

Trusts association, emotion, memory to make sense of the world
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10.

System 1 links with

  • Mood and "cognitive ease"
  • The familiar/patterns
  • Narrative and causality
  • Can be molded by repetition, written words
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When System 2 is engaged you are more likely to accept a biased perspective

commercials work better when you are tired.
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some of system 1's shortcuts: The Halo Effect

first impressions can destroy further evidence
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overconfidence

WE SYSTEMATICALLY UNDERESTIMATE WORKLOAD& OVERESTIMATE OURSELF
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14.

INTUITION

IS TRUSTED FAR TOO MUCH
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15.

PLANNING FALLACY

OUR ABILITY TO FORECAST is poor- and always too optimistic
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FRAMING BIAS

OUR CHOICES DEPEND ON NOW THEY ARE PRESENTED
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OVER-WEIGHTING SMALL PROBABILITIES

HARD FOR US TO DIFFERENTIATE BETWEEN UNLIKELY AND IMPOSSIBLE
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ENGINE OF CAPITALISM?

OPTIMISM = RISK-TAKING
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19.

VALUING DOLLARS

IS CONTEXT-DEPENDENT
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20.

DISHONESTY

WE ARE CREATIVE WHEN JUSTIFYING OUR FREQUENT MINOR DISHONESTY
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21.

LOSS AVERSION

LOSSES HURT AND OVERWHELM SIMILAR GAINS
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22.

FAIRNESS

WE PUNISH THOSE WHO SEEM UNFAIR
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23.

TRUST

PEOPLE ARE MORE TRUSTWORTHY THAN ECONOMIC MODELS SUGGEST
Photo by Thomas Leuthard
24.

HYPERBOLIC DISCOUNTING

A 24-HOUR WAIT FEELS MUCH MORE COSTLY TODAY THAN IN THE FUTURE
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25.

COMPETITOR ORIENTATION

BEATING OTHERS IS OFTEN MORE IMPORTANT THAN ABSOLUTE PERFORMANCE
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Untitled Slide

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Solina Lindahl

http://www.calpoly.edu