Adverse Selection

adverse selection

Sometimes known as “anti-selection,” Adverse selection describes circumstances in which either buyers or sellers use information that the other group does not have, specifically about risk factors related to a particular business undertaking/transaction.

Opportunity Cost

Opportunity Cost

Opportunity cost is the positive opportunities missed out on by choosing a particular alternative (the next-best option). In other words, it’s what you don’t get to do when you make a choice.

Availability Bias

Availability Bias

Availability bias describes the way in which human beings are biased toward judging events’ likelihood/frequency based on how easily their minds can conjure up examples of the event occurring in the past.

Time Inconsistency

Time Inconsistency

The concept of time inconsistency can help us understand why some people procrastinate at work until the last minute, why we often buy gym memberships and don’t end up going, and much more.

Reference Dependent Preferences

Reference Dependent Preferences

Reference dependent preferences are those that depend on comparisons to reference points (often the current state (the status quo), past states, expectations about future states, or social comparisons).

Biased Beliefs

biased beliefs

Biased beliefs are consistent and predictable differences between actions and consequences. Models have been created to understand these systematic differences and attempt to predict the actions of agents with biased beliefs.

Behavioral Economics

introduction to behavioral economics

Behavioral economics is a field of economics that attempts to understand why people behave ‘unexpectedly’ in contrast to the traditional economic theory of the rational individual.