4.1.2.4 Behavioural Economics - Restricted Choice and Mandated Choice (AQA)

Restricted choice and mandated choice are concepts within the field of behavioral economics that examine how decision-making can be influenced by limiting or directing available options. These concepts are used to encourage specific behaviors or outcomes. This study note explores restricted choice, mandated choice, their implications, and real-world applications.

1. Restricted Choice:

• Definition: Restricted choice involves intentionally limiting the available options to guide individuals towards making a particular choice.
• Example: A school cafeteria offering a limited selection of healthy meal options to encourage students to make healthier choices.

2. Mandated Choice:

• Definition: Mandated choice requires individuals to make a decision or selection within a set of options, even if they might prefer not to choose.
• Example: A company requiring employees to choose between enrolling in a retirement plan or opting out, rather than allowing them to avoid making a decision.

3. Nudging Through Defaults:

• Defaults: Defaults are pre-set options that individuals can choose by taking no action. They play a role in both restricted and mandated choice scenarios.
• Example: A company may set the default retirement plan contribution rate at 5% of an employee's salary, encouraging employees to save for retirement unless they actively opt out.

4. Implications of Restricted and Mandated Choice:

• Behavioural Effects: These techniques can influence behavior by making certain options more salient or by simplifying decision-making.
• Decision Convenience: Restricted choice and mandated choice can make decision processes easier by narrowing down options or requiring a decision.

Applications:

• Restricted choice and mandated choice are applied in various contexts, such as healthcare, finance, and environmental conservation, to promote desired behaviors.
• They can encourage individuals to make informed decisions, save money, adopt healthy habits, or reduce environmental impact.

Ethical Considerations:

• While these techniques can be effective, there are ethical concerns about limiting individual autonomy or imposing decisions on individuals.

Multiple Choice Questions:

Question 1: What is restricted choice in behavioral economics?

• A) Providing individuals with unlimited options.
• B) Limiting available options to guide a particular choice.
• C) Encouraging individuals to make choices without restrictions.
• D) Offering a wide variety of choices without any guidance.

Question 2: What is mandated choice?

• A) Allowing individuals to avoid making any choices.
• B) Requiring individuals to make a decision within a set of options.
• C) Offering choices without any requirements.
• D) Limiting the number of available choices.

Question 3: How do defaults relate to restricted and mandated choice?

• A) Defaults have no relevance to these concepts.
• B) Defaults can simplify decision-making in both scenarios.
• C) Defaults are only applicable to restricted choice.
• D) Defaults are only applicable to mandated choice.

Question 4: What is one potential implication of restricted and mandated choice?

• A) Increased decision complexity.
• B) Encouragement of desired behaviors.
• C) Greater individual autonomy.
• D) A reduction in available options.

Question 5: In what contexts are restricted choice and mandated choice often applied?

• A) Art and culture.
• B) Healthcare, finance, and environmental conservation.
• C) Sports and recreation.
• D) Travel and leisure activities.

Question 1: What is restricted choice in behavioral economics?

Answer: B) Limiting available options to guide a particular choice.

Question 2: What is mandated choice?

Answer: B) Requiring individuals to make a decision within a set of options.

Question 3: How do defaults relate to restricted and mandated choice?

Answer: B) Defaults can simplify decision-making in both scenarios.

Question 4: What is one potential implication of restricted and mandated choice?

Answer: B) Encouragement of desired behaviors.

Question 5: In what contexts are restricted choice and mandated choice often applied?

Answer: B) Healthcare, finance, and environmental conservation.