Title: Behavioural economics

Q: Decoy effect
A: - Adding an option which is dominated by the first but not the second option increases popularity of the first option
- violates independence of irrelevant alternatives
- aka
  - attraction effect
  - assymetric dominance effect.

Q: Anchoring bias
A: - An initial piece of information is given outsized importance
- all future judgments are made in relation to this anchor
- aka focalism.

Q: Arbitrary coherence
A: Initial arbitrary prices influence future prices

Q: Imprinting
A: - Rapid learning of a behaviour independent of consequences
- the characteristics of some stimulus in a critical period is assigned an elevated status.

Q: Zero price effect
A: Jump discontinuity in the demand curve at a price of zero.

Q: Diminishing sensitivity
A: The fact that utility against reward is concave

Q: Pain of paying
A: - Unhappiness associated with spending money
- greater for physical cash purchases.

Q: Loss aversion
A: - Losses are twice as powerful, psychologically, as gains
- utility curve is steeper for negative payoffs.