Title: Behavioral Economics | Psychology Today
Headings: Behavioral Economics
Behavioral Economics
Contents
Understanding Behavioral Economics
What is the difference between traditional economics and behavioral economics?
Why is behavioral economics important?
Do economic incentives to change behavior work?
Irrationality and Behavioral Economics
What are some examples of bias in behavioral economics?
What is the main drawback in using heuristics to solve problems?
What are some examples of heuristics that lead to irrational choices?
Does having too many options lead to poor decision-making?
How Can You Influence People's Behavior?
What is nudge theory?
What is an example of a nudge?
What are some nudging techniques?
Is nudging ethical?

Content: These incentives can be positive (e.g., a work bonus) or negative (e.g., a fine for bad behavior). Oftentimes, these incentives will backfire from turning a social exchange into an economic one. Incentives must be both achievable and progressive to be effective at changing behavior. article continues after advertisement
Irrationality and Behavioral Economics
Instead of making optimal choices, people often behave in ways that seem irrational and even against their own interests. Behavioral economics explains why individuals may make irrational choices by demonstrating how their decision-making is influenced by: Biases (such as future discounting)
Heightened emotions
Faulty heuristics
Mental fatigue
Loss aversion
Choice overload
Perceived social norms
Situational framing
Context
What's more, many decisions must be made under conditions of great uncertainty, where not much is known about all the risks and benefits of a choice or where those features are constantly shifting. Behavioral economics aims to understand the effects of uncertainty on decision-making in such realms as consumer purchasing, financial savings, and lifestyle changes. What are some examples of bias in behavioral economics? Created with Sketch. A knee-jerk bias involves making fast, instinctive decisions instead of taking time to deliberate.