Behavioural Economics Archives - Page 2 of 2

Behavioural Economics

Hawthorne Effect Definition

Hawthorne Effect Definition

The Hawthorne Effect occurs when individuals adjust their behaviour as a result of being watched or observed. For instance, employees may work harder and more diligently knowing their manager is closely watching, or children behave better because they are being watched by their parents.

Moral Hazard Definition

Moral Hazard Definition

A Moral Hazard is where an individual becomes more reckless when they know the effects will be borne by another party. In other words, it is when a person does not consider or care about the cost they are imposing on someone else, so take greater risks.