Which of the following best describes loss averse behaviour? 5 A consumer who values gains disproportionately more than losses » A consumer who values gains more than losses A consumer who values losses more than gains A consumer who values losses and gains equallyA consumer is faced with the following choice: + Bundle 1: £20 with certainty * Bundle 2: 50% chance of winning £15 * Bundle 3: £30 with certainty + Bundle 4: A 50% chance of winning £10 or a £50% chance of winning £30 Which of the following best describes risk averse behaviour? © Aconsumer who prefers Bundle 2 to Bundle 1 © Aconsumer who prefers Bundle 4 to Bundle 1 o Aconsumer who prefers Bundle 3 to Bundle 4 @A consumer who prefers Bundle 1 to Bundle 4 Two companies use following slogan as part of their marketing campaign. "Buy Two - Get 50% off" “Buy One, Get One Free" They realise they sell twice as much with Slogan B than Slogan A. This is an example of which of the following behavioural biases? © Heuristics © Commitment device OFraming © Loss aversionWhich of the following policies would be most likely to be considered a nudge? © The tax authorities making tax avoidance legal The tax authorities sending a letter to people to @ tell them their deadline is approaching, which if they miss they will be fined © The tax authorities making tax avoidance illegal o The tax authorities sending a letter to people who tax avoid telling them they are being fined Which of the following is NOT a heuristic associated with bounded rationality decision making? © Anchoring © Availability © Representativeness ProcrastinationOne of the findings of Prospect Theory is that people value losses more than gains. Which of the following illustrates this? o Keeping shares in a portfolio when on a winning streak ° Selling shares in a portfolio when on a losing streak Ordering too much food and overeating just because you have already paid for it ° Choosing a 50% off offer over a Buy One Get One Free offerIn a recent study, people were given the following description of a woman’ “Kathryn is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations" ‘They were then asked, which is more probable? 1. Kathryn isa bank clerk, or 2. Kathryn is 2 bank clerk and is active in the feminist movement The majority of people chose Option 2. Why is this a flawed option? The probability of Kathryn being a bank clerk is greater than her being a bank clerk and a feminist _, The probability of Kathryn being a feminist is greater than her © being a bank clerk « The probability of her being a bank clerk and a feminist is the ~~ same as being a bank clerk The probability of Kathryn being a bank clerk and a feminist is ~ greater than her being a bank clerk Which of the following is NOT a feature associated with the bounded rationality model of decision making? © The use of heuristics in decision making A search for the optimum solution to a problem A shortage of time and other resources © to collect and process information on alternative decision outcomes © Satisficing behaviourThe term “bounded rationality” means: Our decision-making capability is limited by our inability to process large amounts of data We can choose between making irrational and rational decisions © Humans are unable to exercise self-control © Humans are always irrational decision makers In a recent study, people were given the following description of a woman: “Kathryn is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations”. They were then asked, which is more probable? 1. Kathryn isa bank clerk, or 2. Kathryn is a bank clerk and is active in the feminist movement The majority of people chose Option The flaw in their approach is best summarised in which cognitive bias? © Availability bias © Heuristic bias © Confirmation bias (© Representativeness bias