Consumer behavior economics and marketing

Episode 27Behavioral Economics with Mark Earls

In this episode we chat with award-winning author Mark Earls about concepts such as loss aversion, the false consensus effect, and behavioral science's impact on economics.

Episode Highlights

False Consensus Effect

The false consensus effect is a cognitive bias that leads individuals to overestimate the extent to which their beliefs, preferences, or behaviors are shared by others. People tend to believe that their own opinions and actions are more typical or common than they really are.

Peer Pressure

The U.K government put together The Behavioural Insights Team in 2010 to use behavioral science to influence to make public policies more effective. One experiment helped increase the number of U.K. residents that paid their taxes on time by sending out letters that used peer pressure tactics. This mainly focused on messages that said things like, “nine out of ten people pay their tax on time. You are in the minority that does not pay their tax on time.”

Loss Aversion

People often feel the pain of losing something more strongly than the pleasure of gaining something of equal value. For example, many people will be more upset about losing $10 than happy about finding $10.