Question

For this weeks discussion, you will be tasked with completing a "Say, Mean, Matter" for the following terms.

• Behavioral Economics
• Endowment Effect
• Mental Accounting
• Framing Effects
• Anchoring
• Loss Aversion
• Prospect Theory
• Myopia

"Say, Mean, Matter" is a model for developing vocabulary which asks people to;

1) Define - Look it up, provide a verbatim description from text or other resource.

2) Paraphrase - Put it in your own words, use vocabulary familiar to you and find a way to easily explain the term/concept to someone else.

3) Connect - Examine how the term/concept is present (or lacking) in your life. Provide a story/example of a time when you have noticed/evaluated the term/concept as part of your experience.

Additionally,

4)Please investigate the history of economics and report (Chronologically) on some of the major players/schools of thought, and their contributions to the field.

Answer 1

1) Define -

Behavioral Economics : a method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making.

Endowment Effect : The endowment effect refers to the way in which humans tend to prefer objects they already possess over those they do not. We thereby place a higher value on an object we are asked to give up, than on a similar object we are asked to obtain.

Mental Accounting : Mental accounting (or psychological accounting) attempts to describe the process whereby people code, categorize and evaluate economic outcomes.

Framing Effects : The Framing effect is the principle that our choices are influenced by the way they are framed through different wordings, settings, and situations.

Anchoring : Anchoring or focalism is a cognitive bias where an individual depends too heavily on an initial piece of information offered (considered to be the "anchor") when making decisions.

Loss Aversion : loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains.

Prospect Theory : Prospect theory is a behavioral model that shows how people decide between alternatives that involve risk and uncertainty.

Myopia : extra discounting of the future.

2) Paraphrase -

Behavioral Economics : Behaviour in economics

Endowment Effect : Endowment Effect is our tendency to overvalue something simply because we own it. If i try to buy people’s lottery tickets for much more than they paid for, they will be reluctant in giving their tickets.

Mental Accounting : its purpose is to keep track of our money-related decisions so as to give us a model with which to evaluate future financial decisions. It is a way of making sense of the world.

Framing Effects : our choices are influenced by the way they are framed.

Anchoring : Anchoring is the tendency to become attached to a single piece of information that may not be accurate or relevant in trying to draw an appropriate conclusion.

Loss Aversion : "losses loom larger than gains" . For individuals the pain of losing is psychologically twice as powerful as the pleasure of gaining.

Prospect Theory : The prospect theory describes how people choose between different options (or prospects) and how they estimate the perceived likelihood of each of these options.

eg- Bronze medal winners seemed on an average far happier than silver medal winners.

Myopia : being myopic.