Behavioural economics
Utility
The happiness of satisfaction that consumer receives from the consumption of one product.
Total utility
Overall satisfaction.
Marginal utility
Additional utility from one additional consumption of one product.
Mu=∆Tu/∆Q
The law of diminishing Mu
The Mu gained from the consumption of one product tends to fall as consumption increases.
Rational consumer choice
Introduce human psychology into the buyer decision working process and consider how factors other than utility maximization.
Biases
The factors that influence individuals in decision making situation and take them away natural judgement.
Heuristics
In buy situation people use mental shortcuts that allow them to make decision in the time frame they are normally faced with.
Rule of thumb
Based on the belief people make quick judgment, and based on what they normally consider to be an expected outcome.
Anchoring bias
Based on past experiences which may strongly influence a decision.