Overview
Behavioral economics combines insights from psychology and economics to understand how people make decisions. It challenges the traditional view that individuals always act rationally, highlighting the role of cognitive biases and emotions in economic choices. Concepts like prospect theory and nudge...
Key Terms
Example: Confirmation bias leads people to favor information that confirms their existing beliefs.
Example: People prefer a sure gain of $50 over a 50% chance to win $100.
Example: Placing healthy food at eye level in a cafeteria to promote better eating choices.
Example: People would rather not lose $20 than find $20.
Example: A person may choose a good enough option rather than the optimal one due to limited information.
Example: If the first price seen for a car is $30,000, a subsequent price of $25,000 may seem like a bargain.