Behavioral Economics

Behavioral economics mixes ideas from psychology and economics to understand why people behave the way we do. This branch examines how cognitive, social, and emotional factors influence economic decisions. Behavioral economists analyze how these psychological influences lead to various market outcomes, including pricing, consumer behavior, and public policy effectiveness. By acknowledging that people often deviate, behavioral economics offers more nuanced predictions and explanations than traditional economics, which assumes that individuals always act in their own best interests. In these lessons, we introduce the core concepts of behavioral economics and provide some examples.