Chapter 8 - Bake Me the Money!
Chapter 8 - Bake Me the Money! G101
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This 2 page Class Notes was uploaded by KUMIKO Notetaker on Monday October 19, 2015. The Class Notes belongs to G101 at Republic Polytechnic taught by Rumi Sastro in Summer 2015. Since its upload, it has received 27 views. For similar materials see Cognitive Processes and Problem Solving in Education and Teacher Studies at Republic Polytechnic.
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Date Created: 10/19/15
Chapter 8 Bake Me the MoneJL Rational Choice Theory 1 Assumption of completeness For example 3 options none of them are same value 2 Assumption of transitivity for example like math 3 options AgtBgtC so AgtC 3 Assumption of independence of irrelevant alternatives For example 3 options the new option will not change the order of how the rst 3 options ranked Exchange Theory 1 Assumption of people seek to rationally maximize their pro ts 2 Assumption of the interactions operate within the social norms 3 Assumption that the standards people use to evaluate interaction to change over time Irrational Choice of Behaviour Economics 6 Cognitive Biases 1 Anchoring bias Rely too heavily on the rst piece of information offered when making decisions 1 Choice architecture Tendency of people to be impacted by the different ways in which choices are presented to them 1 IKEA effect Tendency of people to place a disproportionately high value on products they partially created 1 Loss aversion Tendency of people to strongly prefer avoiding losses to acquiring gains 1 Paradox of choice Tendency of people to become less satis ed when they are presented with too many choices 1 Bandwagon effect Tendency of people to do something primarily because other people are doing it regardless of their own beliefs Practice Questions 1 Attempt the following questions a Recall and describe an incident when you made a rational choice b Recall and describe an incident when you made an irrational choice c Based on your understanding of Rational Choice and Exchange theories explain why your choices above were rational or irrational 2 Recall a recent shopping trip to a shopping centre where you bought a product a What strategies were used by the store to market their products b Which of these strategies motivated you to take a second glance at their products c Which of these strategies got you to buy their products 2 What are some other cognitive biases that behavioural economists have iden ed Marketers could manipulate these decision making behaviours to trick consumers to buy products that they do not need What are some measures consumers can take to guard themselves against these marketing 39tricks Attempt the following questions a When Denmark changed it default option in its organ donation form to the following the enrolment in the programme increased from 40 to 80 quotCheck this box if you don39t want to participate in the organ onation programquot a James saw a pen for 25 at an of ce supply store and remembered that the same pen is on sale for 18 at another store 15 minutes away He walked to the other store and bought the pen for 18 However he decided to buy the luxurious grey pinstripe suit for 455 a week later at the local mall even though he knew that the suit was on sale for 448 at another store just 15 minutes away b Peter is still holding on to the gym membership long after it has become clear to him that he will never be visiting the gym c jane bought the blue skinny jeans that she saw her favourite celebrity wearing during a local charity show She perceived skinny jeans as the latest fashion trend and wanted one because all her peers were wearing them d When instant cake mixes were introduced to simplify the lives of housewives by minimizing manual labour housewives were resistant to buy the product As a result the manufacturers changed the recipe to require adding an egg and sales went up again e The local insurance company offered 2 to 60 investment options for its customers As options increased the likelihood of investing decreased among its customers Learning Outcomes 1 lmk Deconstruct complex issues to address critical key components of problems and explain the impact of each critical key component in the problem Apply appropriate thinking frameworks such as scienti c thinking design thinking heuristic thinking etc to address complex problemsissues Formulate solutions to problems using appropriate information methods andor frameworks taking into consideration critical key components Explain how solutions are derived through a process of logical interpretation of contexts that requires reasoning skills Evaluate solutions to complex reallife problems justify approach taken to resolve the problem in the team project Demonstrate critical re ection on problem solving process and solutions recommended Need answers Feel free to drop me an email 15043445myrpedusg
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