Hey everyone! Traditional economic theories assume that people make rational decisions to maximize their benefits. However, behavioral economics challenges this idea by showing how psychological biases influence our choices. From everyday purchases to financial investments, our decisions are shaped by cognitive biases, emotions, and mental shortcuts.
Key concepts in behavioral economics include:
– Choice Architecture – How the way choices are presented influences decision-making.
– Framing Effect – The same information can lead to different choices depending on how it is framed.
– Nudging – Subtle interventions that guide people toward better decisions without restricting options (e.g., placing healthier food at eye level in stores).
These insights are widely used in policy-making, marketing, and finance, helping to design strategies that improve decision-making and outcomes. By understanding these principles, we can become more aware of our biases and make more informed choices.
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Thaler, R. H. & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Penguin Books.
https://www.geeksforgeeks.org/behavioral-economics-meaning-principles-application-and-criticism/