ECON 200 Chapter Notes - Chapter 8: Procrastination, Behavioral Economics, Fungibility

• School: University of Maryland
• Department: Economics
• Course: ECON 200
• Professor: Robert Schwab

Document Summary

Behavioral economics: a field of economics that draws on insights from psychology to expand models of individual decision making. Time-inconsistency: when we change our minds about what we want simply because of the timing of the decision: people hold two inconsistent sets of preferences: What we would like to want in the future. Sunk-cost fallacy: sunk costs should not be taken into account in deciding what to do next. Implicit cost of ownership: people value things more once they posses them, form of cognitive bias, is non-monetary. Fungible: easily exchangeable or substitutable: ex: money, putting money into mental categories. Can help save money or stick to a budget.