Glossary
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Bounded Rationality
Decision process strategy limited by human ability to process information proposed by Herbert Simon.
Bounded rationality is a concept proposed by Herbert Simon that challenges the notion of human rationality as implied by the concept of homo economicus. Rationality is bounded because there are limits to our thinking capacity, available information, and time (Simon, 1982).
Certainty/Possibility Effect
Likelihood of selection of choice options affected by the probability of gains or losses, determined not by the absolute value of the change, but by the degree of change relative to a base level. (See Saliency, Prospect Theory and Zero Price Effect.)
Changes in the probability of gains or losses do not affect people’s subjective evaluations in linear terms (see also prospect theory and zero price effect) (Tversky & Kahneman, 1981). For example, a move from a 50% to a 60% chance of winning a prize has a smaller emotional impact than a move from a 95% chance to a 100% chance (certainty). Conversely, the move from a 0% chance to a 5% possibility of winning a prize is more attractive than a change from 5% to 10%.
Choice Architecture
Method of or context within which the presentation of choice options affects the likelihood of option selection. (See Defaults, Framing and Decoy Effect.)
This term coined by Thaler and Sunstein (2008) refers to the practice of influencing choice by “organizing the context in which people make decisions” (Thaler et al., 2013, p. 428; see also nudge).
Choice Overload
Effect on the likelihood of choice option selection from a decision heuristic driven by a large number of decision options.
Also referred to as ‘overchoice’, the phenomenon of choice overload occurs as a result of too many choices being available to consumers. Overchoice has been associated with unhappiness (Schwartz, 2004), decision fatigue, going with the default option, as well as choice deferral—avoiding making a decision altogether, such as not buying a product (Iyengar & Lepper, 2000). Many different factors may contribute to perceived choice overload, including the number of options and attributes, time constraints, decision accountability, alignability and complementarity of options, consumers’ preference uncertainty, among other factors (Chernev et al., 2015).
Chunking
When the same information is presented in a different form that is easier to process, our ability to receive and remember it is greater. People often reorganize, regroup or compress information to aid in its understanding or recall. The resulting subgroups are ‘chunks’, which can be defined as a set of information or items that are treated collectively as a single unit (Mathy & Feldman, 2012).
In behavioral science, chunking has also been used to refer to breaking up processes or tasks into more manageable pieces (see for example Eşanu, 2019, on chunking in UX design or Wijland & Hansen, 2016, on mobile nudging in the banking sector).
Cognitive Bias
Assessment of the selection of a decision option not conforming to norms, formal logic or external “rules.” (See Availability Bias, Representativeness, Optimism Bias and Confirmation Bias.)
A cognitive bias (e.g. Ariely, 2008) is a systematic (non-random) error in thinking, in the sense that a judgment deviates from what would be considered desirable from the perspective of accepted norms or correct in terms of formal logic.
Cognitive Dissonance
Cognitive dissonance, an important concept in social psychology (Festinger, 1957), refers to the uncomfortable tension that can exist between two simultaneous and conflicting ideas or feelings—often as a person realizes that s/he has engaged in a behavior inconsistent with the type of person s/he would like to be, or be seen publicly to be. According to the theory, people are motivated to reduce this tension by changing their attitudes, beliefs, or actions. For example, smokers may rationalize their behavior by holding ‘self-exempting beliefs’, such as “The medical evidence that smoking causes cancer is not convincing” or “Many people who smoke all their lives live to a ripe old age, so smoking is not all that bad for you” (Chapman et al., 1993).
Commitment
Explicit or implicit agreement, with or without consequences, to the acceptance of a future behavioral change.
Commitments (see also precommitment) are often used as a tool to counteract people’s lack of willpower and to achieve behavior change, such as in the areas of dieting or saving. The greater the cost of breaking a commitment, the more effective it is (Dolan et al., 2010).
Decision Fatigue
Impact of multiple and/or complex decision tasks on the heightened likelihood of using a heuristic.
There are psychological costs to making decisions. Since choosing can be difficult and requires effort like any other activity, long sessions of decision making can lead to poor choices.