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84 Cards in this Set
- Front
- Back
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Hedonic utility:
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The pursuit of pleasure and the avoidance of pain explain all human behavior
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Utility
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The value of an option for personal or common use
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:Hedonic Calculus:
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Computation of utility as the net balance of pleasure and pain, as a universal law of human behavior from which economic relations and market exchange behaviors could be derived
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Ordinal Utility:
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Utility is merely ranked and not measured numerically
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Cardinal Utility
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based on rating options on a utility scale…person gives a utility score for each option
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Theory of Subjective Expected Utility:
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Dominant theory of decision making...that costs and benefits of an option is multiplied by the perceived likelihood they occur and that the option with the best net balance of costs and benefits will be chosen.
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Personal Reference
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Comparison of one’s present welfare with welfare in the past.
(increase in salary is great even if it is smaller than inflation) |
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Welfare Function of income:
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A function derived from the assignment of income levels to evaluation such as excellent, good, sufficient and poor
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Preference shift:
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when we adapt our consumption to new reference…aka new car
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Reference shift
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if friends or colleagues earn , change our reference point based on them
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Social Reference:
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Compare one’s personal welfare with the welfare of relevant others.
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Altruism:
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Selfless concern and behavior to improve the welfare of others;
dependent on situation…more if there are expected to have more transactions in the future. -altruism hence is motivated by good relationship with people in future transactions… |
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Ultimatum Game
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split some money between himself and another person.
We observe altruism in ultimatum game…most decide on 50/50 and also mean is 37 to other and keep 63 for themselves. -people not as selfish as economic theory assumes |
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Situational Reference
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People compare cases in the market of setting prices and wages and evaluate cases on fairness. (compare of difference situations)
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Entitlement
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What consumers have; the right to the terms of referent transactions based on historical changes and entitlements
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Loss aversion:
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Motivation one has to avoid loss
-potential loss activates the amygdala part of the brain… |
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Prospect theory…
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-basic characteristic is loss aversion.
-Loss is greater in negative value than a positive value, more than positive value. |
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What do people do to a certain loss or the change to avoid he loss?
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-most will avoid the loss…accept 50% chance to doubling their loss.
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Disposition effect:
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: when investors don’t sell their stocks with a loss, but sell their winning stocks as soon as they have a profit.
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Framing types
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Positive vs. Negative framing→survival frame vs. Mortality frame
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When those are presented with the survival frame, what percentage accept surgery?
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82%
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When those are presented with the mortality frame, what percentage accept surgery?
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56%
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What is Hedonic Framing?
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-tendency of individuals to increase the value for themselves and others by integrating and segregating gains and losses.
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With hedonic framing, what is integration?
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Bring gains or losses together, with a time interval short enough for the reference point not to change.
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With hedonic framing, what is segregation?
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Gains and loss are given with a time interval long enough for recipient to adapt to a new reference point
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What are the four cases of hedonic framing?
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1. segregation of gains
2. integration of losses 3. integration of a small loss with a large gain 4. segregation of a small gain from a large loss |
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Integrated gain vs segregated gain
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Integrated gain has a smaller value than two or more separate gains. (better if separate)
Integrated loss has a smaller value than two or more separate loss (credit card is better integrated) |
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Integration of a loss with a larger gain
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Better to inform about a loss with informing them about a larger gain…people are less upset if the loss is perceived as a diminished gain.
ex: Investment broker may inform his client about a rate/cost increase in combination |
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Segregation of a gain from a larger loss
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Facilitate the acceptance of a loss by telling people about a smaller gain=silver lining…
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Defined benefit plan
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: benefit is set. All entitlement is same
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Defined contribution:
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dependent on duration…
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Results of the SMarT program:
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Since saving was framed as a reduction of a gain, and not as a loss, 78% of those offered joined, 80% who joined remained in the program, and average saving rates increased from 3.5% to 13.6% over the course of 40 months.
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Endowment effect:
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People want to keep what they possess rather than exchange it for another product
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WTA:
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willingness to accept for endowment is greater than WTP
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WTP:
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willingness to PAY is lower that WTA
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Results of coffee mug experiment?
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Coffee mug and chocolate group preferred their own product over other product, whereas control showed that groups didn’t differ significantly.
Also WTA was $7.12 for coffee mug. WTP for mug in another group was $3.12 Another group asked WTP: $2.87 |
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Endowment effect and similar goods
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-people are more willing to trade for Spanish wine for another Spanish wine, and Bulgarian wine for another Bulgarian wine than Spanish for Bulgarian…
Stronger endowment effect for dissimilar, less exchangeable products. |
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Status-quo bias
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Most prefer the standard or default option or the option they already possess…
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New Jersey and car insurance and status quo bias:
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The default choice in NJ is the right to sue option so 75% choose that, whereas 20% in PN choose right to sue…
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Similarity with status-quo bias and the endowment effect
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-evaluation of public goods: products or services for common use.
-WTA will be greater than WTP |
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Sunk Cost effect
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Costs already invested in a project…
Companies will take a large risk to avoid a loss. |
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Fisher published The Theory of Interest.
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Impatient spend, patient invest
There exist higher opportunity cost for a small amount… For it is seen as foregone consumption. |
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Who are Isversky and Kahneman?
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-Originally from Israel and moved to US
-Studied Cognitive heuristics -Developed the prospect theory →rationale economic models don’t account for cognitive heuristics |
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Ex of cognitive heuristics
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-availability heuristic
-representative heuristic -Anchoring heuristic |
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Prospect theory
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-value of loss is greater than value of a gain.
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Weighting function with prospect theory:
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People distort probablility
We are more likely to avoid a loss than secure a gain Emotions alter our choice, for we don’t think of probability like a rational person would… |
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Environmental psychology:
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study interactions between humans and their physical environments
-Also how we affect the environment |
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Global warning
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refers to climate change… increase in the earth’s average temperature. Caused by the emission of greenhouse gases, which cam be attributed to the combustion of fossil fuels.
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Indirect energy use:
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-energy needed to produce, transport, and dispose of goods.
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what is Common dilemmas
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Situations that involve conflict between individual and collective interests.
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Sunk Cost effect
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Costs already invested in a project…
Companies will take a large risk to avoid a loss. |
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Fisher published The Theory of Interest.
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Impatient spend, patient invest
There exist higher opportunity cost for a small amount… For it is seen as foregone consumption. |
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Who are Isversky and Kahneman?
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-Originally from Israel and moved to US
-Studied Cognitive heuristics -Developed the prospect theory →rationale economic models don’t account for cognitive heuristics |
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Ex of cognitive heuristics
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-availability heuristic
-representative heuristic -Anchoring heuristic |
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Prospect theory
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-value of loss is greater than value of a gain.
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Weighting function with prospect theory:
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People distort probablility
We are more likely to avoid a loss than secure a gain Emotions alter our choice, for we don’t think of probability like a rational person would… |
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Environmental psychology:
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study interactions between humans and their physical environments
-Also how we affect the environment |
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Global warning
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refers to climate change… increase in the earth’s average temperature. Caused by the emission of greenhouse gases, which cam be attributed to the combustion of fossil fuels.
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Indirect energy use:
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-energy needed to produce, transport, and dispose of goods.
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what is Common dilemmas
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Situations that involve conflict between individual and collective interests.
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Norm activation model:
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a model that include morality in order to explain why some people give up personal benefits to safeguard environmental quality
-behavior occurs in response to personal norms, which is moral obligations. |
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When are personal norms activated?
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1. when individuals are aware of adverse consequences of their actions to others or the environment
2. When they believe they can reverse the consequences. |
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When does NAM appear successful?
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-explain environmental behavior associated with relatively low behavioral cost.
-NOT when they are costly |
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self serving denial:
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denial of a moral obligation to act pro-environmentally in order to justify a choice to act in a environmentally unfriendly manner
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What are four types of self serving denial
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1. peope my disregard, distort or minimize environmental problems
2. discount their liability for these problems…believing own contribution to the problem is small or undetectable. Identify other parties, such as authorities or industry as being responsible for environmental problems 3. Deny their personal ability or competence to perform the necessary pro-environmental action 4. Argue that their individual pro-environmental actions would not be effective in reducing environmental problems. |
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According to the VBN model, what is our behavior due to?
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-due to ascription of responsibility and awareness of consequence
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What is the New Environmental Paradigm (NEP):
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NEP measures a person’s fundamental beliefs about the relations between humans and the environment…one of the most influential measures of the extent to which people are concerned with the environment
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Those who strongly endorse NEP believe…
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Believe there are limit to growth, and that people cannot dominate and control the environment.
NEP beliefs, positively related with concern about global warming, personal social norms toward recycling, environmental policy support, and buy environmentally friendly prodcuts. However…relations not strong. NEP is particularly related to low-cost behavior |
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Values:
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: affect environmental behavior.
-it is a guiding principle in the life of a person or other social entity |
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What are the four key features to values?
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1. belief about the desirability of a certain end-state (such as good health)
2. values are abstract and transcend in specific situations 3. serve as guiding principles for the selection or evaluation of behavior, people, and events 4. Values are ordered in a system of priorities |
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What are the three general value orientations in environmental literature?
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1. Egoistic value orientation: people try to maximize their own outcomes
2. Altruistic value orientation: concern for others 3. Biospheric (ecocentric) value orientation: concern with non-human species and the biosphere Those with more altruistic and biospheric are more likely to engage in pro-environmental behavior If biospheric conflict with altruistic, less likely to engage in pro-environmental behavior. |
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What are habits' three important characteristics?
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1. activated in the presence of a specific goal
2. Same course of action will be repeated when outcomes are satisfactory 3. Mediated by cognitive processes |
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What is Aarts and colleagues definition of habits
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Goal-directed automated behaviors that are mentally represented.
-When habits are strong, we no longer make reasoned choices. |
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How did environmental psych come about?
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1973 Arab-Israeli War
OPEC cut US oil, and caused limited resources and gave Americans the first glimpse of the need to conserve |
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Ways to protect the environment
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1. Commons dilemma→common areas have dilemma…limited resource…need everyone for it to work
2. Norm Active Model: Explain why people do pro-social behavior→morality is part of the reason why people give up selfish things |
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What is AC:
What is AR:\ IF AC and AR is high, what happens |
AC: Aware of consequences
What is AR: ascribe responsibility -If both high, moral norms will contribute. |
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4 parts of Self-Serving denial
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1. Distort or deny the existence of the problem
2. Discount liability for problem…my contribution is so small…why should I change 3. Deny ability or responsibility 4. It’s not going to help |
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Environmental Psychology
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1. ecotheology
2. deep ecology 3. ecofeminism |
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Ecotheology
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a. Reconcile Christian and Ecology
b. Domination with stewardship c. Earth is provided for us to use d. Materialism due to Christian beliefs |
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Deep Ecology
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a. Nature centered
b. Nature has inherent value in themselves c. To save the environment, we need to radically change our thinking |
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Ecofeminism
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a. Solve gender inequality and environment
b. Western view of nature is inferior, like women c. We need to accept the female paradigm d. Nature vs. what males think |
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What has been done to affect a change in behavior
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1. Residential Energy Consumption
a. Feedback help to use less energy b. Seligman and Becker had signaling device… 2. Commitment a. People will state public behavior and more likely to keep with commitment b. Even if we take away the public recognition, people still want to be consistent and commit 3. Social comparison a. Use less energy in home study i. Comparative feedback: Social comparison feedback decreased consumption ii. So put what everyone else is doing 4. Persuasion a. Yale Model of Persuasion: attend, comprehend, retain, and act→more credible the source, more likely to get an impact |
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In the study with Manger of Consumer Affairs vs. Public Service Commission State what were the results?
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In the study with Manger of Consumer Affairs vs. Public Service Commission State
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In the study with Manger of Consumer Affairs vs. Public Service Commission State
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-changed behavior and significantly decreased consumption
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