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- a decision based only on a specific rule or rules and not on any other consideration:
dictionary.cambridge.org/dictionary/english/technicality
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Does economic psychology follow utility theory?
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Jul 27, 2020 · To clarify what I mean by these five questions, I will need to define the concept of the ‘ultimate aims of economics’ as a discipline (Section 2). This paper builds on recent attempts within the philosophy of economics to engage with the psychology-in-economics controversy in a nuanced way.
- Christopher Clarke
- 2020
Jul 27, 2019 · Economic psychology. Economic behavior. Consumer behavior. Marketing. Economics. Economic psychology studies the psychological aspects behind various economic phenomena and the mechanisms of people’s judgment, decision making, and behavior in an economic situation.
- Kazuhisa Takemura
- kazupsy@waseda.jp
- 2019
Economic psychology is the interdisciplinary investigation of the interface between psychology and economics. It is concerned with the psychological basis of the economic behaviors of individuals, and the impacts of economic processes on individuals' psychology.
Economic Psychology It is the branch of psychology which studies the cognitive, emotional, social and human factors involved in the process of decision making by consumers, investors, borrowers, etc. The effects of the decisions being made on returns, market prices, allocation of resources, etc. too, is studied.
- What Is Behavioral Economics?
- Understanding Behavioral Economics
- History of Behavioral Economics
- Principals of Behavioral Economics
- Applications of Behavioral Economics
- The Bottom Line
Behavioral economics is the study of psychology as it relates to the economic decision-making processes of individuals and institutions. Behavioral economics is often related with normative economics. It draws on psychology and economics to explore why people sometimes make irrational decisions, and why and how behavior diverges from the prediction...
In an ideal world, people would always make optimal decisions that provide them with the greatest benefit and satisfaction. In economics, rational choice theory states that when humans are presented with various options under the conditions of scarcity, they would choose the option that maximizes their individual satisfaction. This theory assumes t...
Notable individuals in the study of behavioral economics include Nobel laureates Gary Becker (motives, consumer mistakes; 1992), Herbert Simon (bounded rationality; 1978), Daniel Kahneman (illusion of validity, anchoring bias; 2002), George Akerlof (procrastination; 2001), and Richard H. Thaler(nudging, 2017). In the 18th century, Adam Smith noted ...
The field of economics is vast. Although behavioral economics is just a subset of the field, it itself has a number of guiding principles that dictate the themes within behavioral economics. Some of the primary principles and themes are listed below.
Financial Markets
One field in which behavioral economics can be applied to is behavioral finance, which seeks to explain why investors make rash decisions when trading in the capital markets. Much like how poker professionals not only study the mathematics and odds of poker, they also attempt to capitalize on the irrational nature of other players. The same can be said of financial markets.
Game Theory
When a decision made leads to error, heuristics can lead to cognitive bias. Behavioral game theory, an emergent class of game theory, can also be applied to behavioral economics as game theory runs experiments and analyzes people’s decisions to make irrational choices. This concept attempts to override illogical behavior to predict consumption outcomes.
Pricing Strategies
Companies are increasingly incorporating behavioral economics to increase sales of their products. In 2007, the price of the 8GB iPhone was introduced for $600 and quickly reduced to $400. By introducing the phone at a higher price and bringing it down to $400, consumers believed they were getting a pretty good deal, even if the true value of the product was only $400.
Behavioral economics is a field of study aimed at understanding why people make economically irrational decisions. Rational choice theory holds that consumers make choices that maximize their utility. In reality, people can be swayed or distracted from doing so. Behavioral economics attempts to understand how and why this happens.
- Will Kenton
- 2 min
Shaped by the field-defining work of University of Chicago scholar and Nobel laureate Richard Thaler, behavioral economics examines the differences between what people “should” do and what they actually do and the consequences of those actions.
Economic psychology encompasses market research, consumer communication, and macro-economics (i.e., the relationship of income, consumption, and savings). From: International Encyclopedia of the Social & Behavioral Sciences, 2001
