Browse Definitions :
Definition

behavioral economics

Contributor(s): Matthew Haughn

Behavioral economics is the study of economic decision-making by individuals and institutions.

Behavioral economics studies consumer choices, market events and human psychology to help understand their decisions and to try to make more accurate economic models. Behavioral economics attempts to unite the fields of behavioral psychology and economics.

Prior to behavioral economics, economic predictions were based on an assumed capacity in the average consumer for making rational choices. The model of rational choice assumed the decisions of consumers were rational, planned and made for their own wellbeing. This model hinged on the created concept of homo economicus : humans motivated by self-interest, choosing amongst options in situations of scarcity.

The earliest revelations of behavioral economics revealed entirely different trends in consumer behavior, showing how flawed the assumptions of rational choice models were. Consumers are often uncertain of what they want, for example, and make choices that are not to their long-term benefit. Frequently, consumers don’t know themselves what they will want in the future.

Behavioral economics has revealed that the unpredictability of consumers will almost certainly maintain an unpredictable market. The field of study is criticized for not yielding more predictive models and for using methods of survey and experimentation that are not favored in traditional economics.The fundamental assumption of selfishness in behavioral economics has been contested by research which inspired the newer concept of homo reciprocans : humans as cooperative and collaborative actors who work towards improving their shared environment.

This was last updated in January 2018

Continue Reading About behavioral economics

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • regulatory compliance

    Regulatory compliance is an organization's adherence to laws, regulations, guidelines and specifications relevant to its business...

  • Whistleblower Protection Act

    The Whistleblower Protection Act of 1989 is a law that protects federal government employees in the United States from ...

  • smart contract

    A smart contract, also known as a cryptocontract, is a computer program that directly controls the transfer of digital currencies...

SearchSecurity

  • RSA algorithm (Rivest-Shamir-Adleman)

    The RSA algorithm is the basis of a cryptosystem -- a suite of cryptographic algorithms that are used for specific security ...

  • remote access

    Remote access is the ability to access a computer or a network remotely through a network connection.

  • IP Spoofing

    IP spoofing is the crafting of Internet Protocol (IP) packets with a source IP address that has been modified to impersonate ...

SearchHealthIT

SearchDisasterRecovery

  • virtual disaster recovery

    Virtual disaster recovery is a type of DR that typically involves replication and allows a user to fail over to virtualized ...

  • tabletop exercise (TTX)

    A tabletop exercise (TTX) is a disaster preparedness activity that takes participants through the process of dealing with a ...

  • risk mitigation

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a data center.

SearchStorage

  • enterprise storage

    Enterprise storage is a centralized repository for business information that provides common data management, protection and data...

  • disk array

    A disk array, also called a storage array, is a data storage system used for block-based storage, file-based storage or object ...

  • optical storage

    Optical storage is any storage type in which data is written and read with a laser. Typically, data is written to optical media, ...

Close