Cognitive Bias and Behavioral Economics in Real-World Situations

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
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1ECONOMICS ASSIGNMENT
Table of Contents
Introduction:...............................................................................................................................2
Real-world case:.........................................................................................................................2
Nudge:........................................................................................................................................3
Economic Problems:..................................................................................................................3
Concept of classical economists:...............................................................................................4
Concept of behavioral economics:.............................................................................................5
Conclusion:................................................................................................................................6
References:.................................................................................................................................7

2ECONOMICS ASSIGNMENT
Introduction:
Cognitive bias is a process, where people do not take any decision rationally. Thus,
people take their quick decision, based on their choice. Consequently, this systematic pattern
of thinking may bring inaccurate judgment, perceptual distortion and illogical interpretation
(Boukhechba et al. 2018). This type of biasness can be found in various grounds, for
instance, political, economical and social one, where people take their decision from their
own perspectives, without considering any judgment. Hence, this report has intended to
analyze some real-world situations, where cognitive biases can be seen in various form, like,
bandwagon effect, anchoring, decoy effect and so on. Moreover, the problem of biasness can
also be found within the behavioral economics.
Real-world case:
In real world, people have possessed various notions, which they follow without any
judgment. For instance, society influences an individual to take a bias decision for a
particular product. This can be explained with the help of real world case. People have
adopted fast foods as necessary goods within their daily life and this in turn has helped those
companies to expand their business. However, not all people, especially, children consume
fast foods because of their busy schedule. Rather, most of them consume these products as
other some people have consumed those and have provided good feedbacks regarding tastes,
quality and quantity (Rohaut and Claassen 2018). In the context, preference has also played
an important role. Fast food industry is expanding significantly with large number of
companies, providing same kind of foods. However, to differentiate with each other, they use
their own tag line during advertisement to attract customers. Those tag lines sometimes
influence people positively and consequently, some people have started to prefer a particular
fast food company without considering the products and quality of others. Thus, without
judging prices, qualities and quantities of other companies, people have behaved irrationally