Behavioral Economics Vocabulary

decision-making limited by information, time, and cognitive capacity

“Bounded rationality explains satisficing behavior.”

the tendency to prefer avoiding losses over acquiring gains

“Loss aversion makes people hold losing stocks too long.”

over-relying on the first piece of information encountered

“The initial price serves as an anchor in negotiations.”

valuing something more simply because you own it

“The endowment effect explains reluctance to sell at fair prices.”

preferring smaller immediate rewards over larger later ones

“Hyperbolic discounting explains procrastination.”

different reactions to the same information based on presentation

“Describing meat as '90% fat-free' vs '10% fat' is a framing effect.”

following the crowd rather than independent analysis

“Herd behavior amplifies market bubbles.”

preference for the current state of affairs

“Status quo bias keeps people with suboptimal investments.”

treating money differently based on subjective categories

“Mental accounting explains why people splurge tax refunds.”

subtle policy changes that guide behavior without mandates

“Making organ donation opt-out is a nudge.”