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Behavioural economics

How context, habits and mental shortcuts shape our decisions.

Why do we choose the way we do?

Start with a concept below, or follow a connected learning path. Definitions are starting points: assumptions and evidence determine how an idea applies.

Projection bias

Overestimating how closely future preferences will resemble how you feel now.

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Behavioural economics

Ambiguity aversion

A preference for known probabilities over unknown probabilities in otherwise comparable choices.

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Behavioural economics

Decoy effect

An additional option can change preferences between existing options when it is dominated by one of them.

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Behavioural economics

Loss aversion

Losses may weigh more heavily than comparable gains relative to a reference point.

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Behavioural economics

Present bias

Giving disproportionate weight to immediate outcomes compared with later ones.

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Behavioural economics

Anchoring

Allowing an initial reference value to influence a later judgement, even when it is weakly relevant.

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Behavioural economics

Confirmation bias

Giving more attention or weight to evidence that supports an existing belief.

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Behavioural economics

Mental accounting

Treating money differently according to the labels or categories assigned to it.

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