Our senses and mental capacities are all extremely limited. Therefore we can safely say that Neuroeconomics is basically Neuroscience applied to Decision Making Why the term "Neuroeconomics" ? "Neuro" comes from Neuroscience The area studying how our mind works The word "Economy" refers to the study on how to manage limited resources Let's assume that there are about 15,000 homeless people living in the city of São Paulo.
Then, there's this very reliable and honest non-profit organization. All they need is a certain amount of money to keep their work flowing. So I ask you: would you be willing to donate money to this NGO?
Would you be willing to donate say $50? How much exactly would you be willing to donate? Think about it.
Now, had I suggested you $5 instead of $50 and then asked you How much exactly would you be willing to donate You most certainly would have come up with a smaller amount when compared to the $50 suggestion. If I suggest you $50 You'd probably consider donating $20, $30, $40 and even $60. If I ask you only $5 You'd consider donating $2, $4 and even $10.
On average, what happens is that your answer is actually being influenced by my suggestion. This happens with us all the time and is usually referred to as "Anchoring Effect" a form of influencing our economic choices. An effect present in choosing the amount of money to donate to charity as well in our decision to purchase a car or a house.
All salespeople take advantage of this technique to increase their sales. to increase their sales. Take a look at this charade: S _ L _ What's the first word S _ L _ that comes to mind?
There's a high probability that you thought of the word SALE Because I was talking about sales. But if you were wearing a silk dress or shirt the word SILK would have a greater chance to be chosen than the word SALE. And if you were in the middle of a crop field of a crop field The probability of the word SILO showing up is even bigger.
Now take a look: Between 0 and 9 which number first comes to mind? If I conduct a research I'm certain that the number 7 will be the most chosen number because I was using on you the "Priming Effect". What did I do?
I influenced your decision by presenting several random numbers amid a repetition of sevens. The same way that talking about sales will lead you to choose the word SALE showing you random numbers with a seven will lead you to choose 7. Another good example of our irrationality comes in the form of the Mere-exposure Effect creating the illusion of familiarity.
Why is it that a politician needs to raise money? One of the biggest reasons lies in the fact that the more money he/she has the bigger is his/her media exposition and the more we're exposed to this person the more familiar they become to us. And we tend to prefer those we are more familiar with.
This also happens with celebrities. Lots of people mourn the loss of an actor as if they were a close relative. Another good example of our irrationality is what we call "Confirmation Bias" When we apply our personal convictions to a subject matter in order to understand the facts presented to us.
A good example of this can be seen when someone with an inflated ego is ignored by someone else. They'll automatically assume the person is gay, since their personal bias tells them that no one in their right mind would ignore them unless they have no interest in that gender. In troubling times like the ones we experience today We become hostages of these examples of irrationality Be it in politics religion or in our personal relationships.
We must constantly control ourselves so that we don't fall into the mind traps we create. If you insist on believing you're a rational being Then subscribe to our channel.
