Behavioral Economics

Behavioral economics is an area of research that looks to apply psychological insights to the study of economics. It explores the impact of cognitive, emotional and social factors on economic decision-making. Its significance lies in its ability to explain behavior that often appears to go against economic logic and traditional economic models. By understanding the psychological influences on decision-making, behavioral economics can help to explain things like why people might not save enough for retirement, or why they may pay too much for something they don't need. As such, the key use of behavioral economics is to inform public policies to help people better understand and manage their own economic decisions. It is increasingly being used by organizations to inform marketing and pricing strategies and to design products, services and incentives to encourage better decision-making.