Our consumption and financial decisions are not always rational; they are often influenced by emotions, biases or cleverly designed marketing campaigns. How does the psychology of consumption work and why we often act to the detriment of our own interests are some of the questions to which Ines Merkl, the director of Moneterra – Money Museum of the Croatian National Bank, responds in the new episode of the HNB Podcast.
Sections:
01:09
Behavioural economics deals with decision-making and selection, not in the context of ideal or expected rationality as neoclassical economics, but in normal life circumstances where errors and oversights occur. In real life, human behaviour can never be completely rational in a way rationality is defined by economic theory.
05:14
Buyers often lack all information necessary to make decisions, which is why they “follow the herd” in belief that the group knows better and has more information than any individual. From conformity to the making of important financial decisions, herd mentality may result in bad decisions and creation of market bubbles.
08:05
Money is money and there should be no difference between cash and card payments, provided that a product or service is paid at the same price. However, there is a difference, as selection of a payment method is connected to our cognitive processes and sense of control, affecting the final decision on a purchase.
11:21
Marketing tricks help in drawing attention and making profits because buyers often do not make fully rational decisions; instead, decisions are often influenced by colour or taste, comparison with other products, packaging design or product placement in a shop.
14:52
Decisions do not depend solely on us, but on information at our disposal. This is why we have to gather information and become aware of our behaviour, and detect the mistakes we make in order to eliminate them.