research on behavioural economics

Covering a story? Visit our page for journalists or call (773) 702-8360.

Top Stories

Two uchicago students honored for commitment to environmental work.

• Majority of Americans will pay more for electric vehicles made in U.S., survey finds

UChicago to partner on $12 million NSF project to ‘decarbonize’ computing

Behavioral economics, explained.

Behavioral economics combines elements of economics and psychology to understand how and why people behave the way they do in the real world. It differs from neoclassical economics, which assumes that most people have well-defined preferences and make well-informed, self-interested decisions based on those preferences.

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.

Jump to a section:

What is behavioral economics, what are the origins of behavioral economics research, and who are tversky and kahneman.

• What role have Richard Thaler and University of Chicago economists played in the development of the field?

What is a “nudge” in behavioral economics?

Guide to behavioral economics terms.

Behavioral economics is grounded in empirical observations of human behavior, which have demonstrated that people do not always make what neoclassical economists consider the “rational” or “optimal” decision, even if they have the information and the tools available to do so.

For example, why do people often avoid or delay investing in 401ks or exercising, even if they know that doing those things would benefit them? And why do gamblers often risk more after both winning and losing, even though the odds remain the same, regardless of “streaks”?

By asking questions like these and identifying answers through experiments, the field of behavioral economics considers people as human beings who are subject to emotion and impulsivity, and who are influenced by their environments and circumstances.

This characterization draws a contrast to traditional economic models that have treated people as purely rational actors—who have perfect self-control and never lose sight of their long-term goals—or as people who occasionally make random errors that cancel out in the long run.

Several principles have emerged from behavioral economics research that have helped economists better understand human economic behavior. From these principles, governments and businesses have developed policy frameworks to encourage people to make particular choices.

Behavioral economics has expanded since the 1980s, but it has a long history: According to Thaler, some important ideas in the field can be traced back to 18th-century Scottish economist Adam Smith.

Smith is often remembered for the concept of an “invisible hand” that guides an overall economy to prosperity if each individual makes their own self-interested decisions—a key concept in classical and neoclassical economics. But he also recognized that people are often overconfident in their own abilities, more afraid of losing than they are eager to win and more likely to pursue short-term than long-term benefits. These ideas (overconfidence, loss aversion and self-control) are foundational concepts in behavioral economics today.

More recently, behavioral economics has early roots in the work of Israeli psychologists Amos Tversky and Daniel Kahneman on uncertainty and risk. In the 1970s and ’80s, Tversky and Kahneman identified several consistent biases in the way people make judgments, finding that people often rely on easily recalled information, rather than actual data, when evaluating the likelihood of a particular outcome, a concept known as the “availability heuristic.” For example, people may think shark or bear attacks are a common cause of death if they’ve read about one such attack, but the incidents are actually very rare.

With “prospect theory,” Tversky and Kahneman also demonstrated that framing and loss aversion influence the choices people make. For example, if presented with an opportunity to win $250 guaranteed or gamble on a 25% chance of winning $1,000 and a 75% chance of winning nothing, most people will choose the sure win. But if presented with the chance to lose $750 guaranteed or a 75% chance to lose $1,000 and a 25% chance to lose nothing, most people will risk losing $1,000, hoping for the slim chance that they will lose nothing at all.

This classic example demonstrates that people are more willing to take a greater statistical risk if it means avoiding a $1,000 loss versus obtaining a $1,000 win, which contradicts expected utility theory. Prospect theory and other work by Tversky and Kahneman continues to inform many areas of behavioral economics research today.

What role have Richard Thaler and behavioral economists at the University of Chicago played in the development of the field?

In the 1980s, Richard Thaler began to build on the work of Tversky and Kahneman, with whom he collaborated extensively. Now the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the Booth School of Business, he is today considered a founder of the field of behavioral economics.

Thaler’s research in identifying the factors that guide individuals’ economic decision-making earned him the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2017. His ideas stem in part from a series of observations he made in graduate school that led him to believe that people’s behavior deviated from traditional economic models in predictable ways.

For example, Thaler observed that he and a friend were willing to forgo a drive to a sporting event due to a snowstorm because they had been given free tickets. But had they purchased the tickets themselves, they would have been more inclined to go, even though the tickets would have been valued at the same price regardless, and the danger of driving in the snowstorm unchanged. This is an example of the “sunk cost fallacy”—the idea that people are less willing to give up on projects they have personally invested in, even if it means more risk.

Thaler is also known for popularizing the concept of the “nudge,” a conceptual device for leading people to make better decisions. A “nudge” takes advantage of human psychology and a number of other concepts in behavioral economics, including mental accounting—the idea that people treat money differently based on context. For example, people are more willing to drive across town to save $10 on a $20 purchase than $10 on a $1,000 purchase, even though the effort expended and the amount of money saved would be the same.

Thaler and other UChicago economists—including Leonardo Bursztyn, Josh Dean, Nicholas Epley, Austan Goolsbee, Alex Imas, John List, Susan Mayer, Sendhil Mullainathan, Devin Pope, Rebecca Dizon Ross and Heather Sarsons—continue to conduct empirical research, including field experiments, that explore behavioral economics from multiple angles.

In behavioral economics, a “nudge” is a way to manipulate people’s choices to lead them to make specific decisions: For example, putting fruit at eye level or near the cash register at a high school cafeteria is an example of a “nudge” to get students to choose healthier options. An essential aspect of nudges is that they are not coercive: Banning junk food is not a nudge, nor is punishing people for choosing unhealthy options.

Thaler’s ideas about nudges were popularized in Nudge: Improving Decisions about Health, Wealth, and Happiness , his 2008 book with former UChicago legal scholar Cass Sunstein, now of Harvard University. Businesses and governments, including the U.S. government under President Barack Obama, have adapted Thaler and Sunstein’s ideas about nudges into policy.

For example, automatically enrolling employees in 401k plans—and asking them to opt out rather than offering them the chance to opt in—is an example of a nudge to encourage better and more consistent saving for retirement. Another seeks to make organ donation standard practice, by requiring people registering for drivers’ licenses to indicate whether or not they are willing to donate.

The formal term Thaler and Sunstein use to describe a situation designed around nudges is “libertarian paternalism”—libertarian because it preserves choice, but paternalistic because it encourages certain behavior. In Thaler’s words: “If you want people to do something, make it easy.”

The availability heuristic refers to the idea that people often rely on easily recalled information, rather than actual data, when evaluating the likelihood of a particular outcome. For example, people may think shark or bear attacks are a common cause of death if they’ve read about one such attack, but the incidents are actually very rare.

Bounded rationality refers to the fact that people have limited cognitive ability, information and time, and do not always make the “correct” choice from an economist’s point of view, even if information is available that would point them toward a particular course of action.

This might be because they cannot synthesize new information quickly; because they ignore it and instead choose to “go with their gut”; or because they don’t have the time to fully research all options. The term was coined in 1955 by Nobel laureate and UChicago alum Herbert A. Simon, AB’36, PhD’43.

Bounded self-interest is the idea that people are often willing to choose a less-optimal outcome for themselves if it means they can support others. Giving to charity is an example of bounded self-interest, as is volunteering. While these are common activities, they are not captured by traditional economic models, which predict that people act mostly to further their own goals and those of their immediate family and friends, rather than strangers.

Bounded willpower captures the idea that even given an understanding of the optimal choice, people will often still preferentially choose whatever brings the most short-term benefit over incremental progress toward a long-term goal. For example, even if we know that exercising may help us obtain our fitness goals, we may put it off indefinitely, saying we will “start tomorrow.”

Loss aversion is the idea that people are more averse to losses than they are eager to make gains. For example, losing a $100 bill might be more painful than finding a $100 bill would be positive.

Prospect theory refers to a series of empirical observations made by Kahneman and Tversky (1979) in which they asked people about how they would respond to certain hypothetical situations involving wins and losses, allowing them to characterize human economic behavior. Loss aversion is key to prospect theory.

The sunk-cost fallacy is the idea that people will continue to invest in a losing project simply because they are already heavily invested, even if it means risking more losses.

Mental accounting is the idea that people think about money differently depending on the circumstances. For example, if the price of gas goes down, they may begin to buy premium gas, leading them to ultimately spend the same amount, rather than taking advantage of the savings offered by the lower price.

Related Experts

Richard Thaler

Sendhil Mullainathan

Nicholas Epley

More Explainers

Improv, Explained

Cosmic rays, explained

Thaler’s Nudge gets global attention— The University of Chicago

The Two Friends Who Changed How We Think About How We Think— The New Yorker

Richard H. Thaler Facts— The Nobel Prize

7 Richard Thaler Columns That Explain How Human Behavior Affects Economics— The New York Times

NBER Working Paper on Behavioral Economics

Behavioral economics from nuts to ‘nudges’— Chicago Booth Review

Related Topics

Latest news, big brains podcast: learning to speak to whales using ai.

Class of 2024 learns ‘three little secrets to change the world’

Quantum Computing

Researchers draw inspiration from ancient Alexandria to optimize quantum simulations

The College

Go 'Inside the Lab' at UChicago

Explore labs through videos and Q and As with UChicago faculty, staff and students

Convocation

Graduates reflect on their College journey: ‘We made it here together’

National Science Foundation

Around UChicago

Around Campus

Rockefeller Chapel renovation to add beauty, functionality to historic landmark

Quantrell and PhD Teaching Awards

UChicago announces 2024 winners of Quantrell and PhD Teaching Awards

Campus News

Project to improve accessibility, sustainability of Main Quadrangles

National Academy of Sciences

Five UChicago faculty elected to National Academy of Sciences in 2024

UChicago women’s tennis team wins first NCAA title

UChicago men’s tennis team storms back to win NCAA championship

Biological Sciences Division

“You have to be open minded, planning to reinvent yourself every five to seven years.”

UChicago Class Visits

Atop a Chilean mountain, undergraduate students make cutting-edge astronomical observations

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

• View all journals
• Explore content
• About the journal
• Publish with us
• Sign up for alerts
• Published: 07 November 2017

The rise of behavioural economics

Nature Human Behaviour volume  1 ,  page 767 ( 2017 ) Cite this article

11k Accesses

8 Citations

175 Altmetric

Metrics details

The Nobel Prize in Economic Sciences this year, in honouring the work of Richard H. Thaler, highlights the growing impact of behavioural economics in science and policy.

The Nobel Prize in Economic Sciences was set up in 1969. Since then, and including this year’s recipient, Richard H. Thaler from The University of Chicago Booth School of Business, 6% of economics Nobel laureates could be described as behavioural economists 1 . They seem to form a very small fraction of all recipients; however, with one exception, these awards were made in the new millennium, reflecting the increasing visibility of the discipline.

Neoclassical economics has dominated the field of microeconomics since the late nineteenth century. In neoclassical economics, individuals are rational utility maximizers, making inferences and decisions on the basis of perfect information. In its current incarnation, behavioural economics arose in the second half of the twentieth century by integrating insights from economics and psychology. It is motivated by the observation that, in practice, individual and collective human behaviour deviates systematically from normative principles of economic behaviour. Humans are characterized by bounded rationality, bounded willpower and bounded self-interest 2 : cognitive limitations constrain human judgement and choice, people occasionally make choices that are against their own interests and people are often altruistic.

Although the two fields have not seen eye to eye, they each illuminate economic behaviour at different levels of explanation. It is behavioural economics, however, that is currently experiencing significant prominence in the policy domain, and Thaler’s work has been instrumental in this respect.

In his 40-year-long academic career, Thaler has been one of the key contributors to the body of research that spurred the establishment of behavioural economics and behavioural finance as fields of study. The Royal Swedish Academy of Sciences in its press release announcing the 2017 economics prize highlighted Thaler’s contributions in three areas: limited rationality, social preferences and lack of self-control. Outside of academic circles, Thaler is probably best known for his applied work on behaviour change through nudges. In a 2003 academic article 3 , Thaler and legal scholar Cass R. Sunstein advocated for ‘libertarian paternalism’: the idea that it is possible for organizations to guide people’s choices towards outcomes beneficial to them, while maintaining freedom of choice. They argued that design choices, be they by governments or private institutions, are inevitable; given that people are not always rational but tend to err in systematic ways, it is possible to design choices in such a way that, although individuals still have the freedom to choose, they are ‘nudged’ towards a choice that is in their best interest.

Nudge , a 2008 book-length promulgation of libertarian paternalism and how it can be applied in public policy through nudges that steer people towards decisions beneficial to their health and well-being, proved highly influential 4 . The book and approach described therein inspired the setting up of a ‘nudge unit’, the Behavioural Insights Team, as a part of the UK government in 2010. Thaler advised the UK government on the unit’s launch and the Behavioural Insights Team has spawned branches in a number of countries, including Australia and the United States. Barack Obama established a similar unit — the Social and Behavioural Sciences Team — as part of the US federal government and in 2015 issued an executive order instructing federal government agencies to apply insights from behavioral science to their programmes.

Libertarian paternalism has not been without vocal critics, both within the academic world and in the public domain. Philosophers have questioned the ethics of nudging 5 , some fellow behavioural economists have questioned the inevitability of paternalism in enabling behaviour change 6 , while the public has occasionally voiced concerns about being influenced without their knowledge 7 . Objections notwithstanding, the adoption of nudging and behavioural insights in public policy reflects the burgeoning role behavioural economics plays in public policy: governments worldwide are increasingly aware that the typical policy tools of legislating and informing are insufficient to bring about behavioural change.

To mark the occasion of this year’s Nobel Prize in Economic Sciences, we have put together a collection of behavioural economics articles published this year in Nature Human Behaviour . From a typology of nudges for health-related behaviour change to an examination of under what conditions people will cooperate to sustain a public good, the research and opinion published in our pages exemplifies some of the key contributions this fast-growing field is making to science and policy. Behavioural economics is a core discipline in Nature Human Behaviour and we strongly encourage the submission of theoretical, empirical and applied research that furthers our understanding of real-world economic choices and behaviour change.

Shiller, R. Richard Thaler is a controversial Nobel prize winner — but a deserving one. The Guardian (11 October 2017); https://www.theguardian.com/world/2017/oct/11/richard-thaler-nobel-prize-winner-behavioural-economics

Mullainathan, S. & Thaler, R. H. Behavioral Economics NBER Working Papers 7948 (National Bureau of Economic Research, 2000).

Thaler, R. H. & Sunstein, C. R. Am. Econ. Rev 92 , 175–179 (2003).

Article   Google Scholar  

Thaler, R. H. & Sunstein, C. R. Nudge: Improving Decisions about Health, Wealth, and Happiness (Yale Univ. Press, New Haven, CT, 2008).

White, M. D. The Manipulation of Choice: Ethics and Libertarian Paternalism (Palgrave Macmillan, New York, NY, 2013).

Grüne-Yanoff, T. & Hertwig, R. Minds Mach. 26 , 149–183 (2016).

Dunt, I. Nudge nudge, say no more. Brits’ minds will be controlled without us knowing it. The Guardian (5 February 2014);  https://www.theguardian.com/commentisfree/2014/feb/05/nudge-say-no-more-behaviouralinsights-team

Download references

Rights and permissions

Reprints and permissions

About this article

Cite this article.

The rise of behavioural economics. Nat Hum Behav 1 , 767 (2017). https://doi.org/10.1038/s41562-017-0252-9

Download citation

Published : 07 November 2017

Issue Date : November 2017

DOI : https://doi.org/10.1038/s41562-017-0252-9

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

Quick links

• Explore articles by subject
• Guide to authors
• Editorial policies

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

• Search Search Please fill out this field.

What Is Behavioral Economics?

Understanding behavioral economics, factors that influence behavior, principals of behavioral economics.

• Appications
• Behavioral Economics FAQs

The Bottom Line

• Behavioral Economics

What Is Behavioral Economics? Theories, Goals, and Applications

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 predictions of economic models.

Key Takeaways

• Behavioral economics is the study of psychology that analyzes the economic decisions people make.
• Factors that affect behavior include bounded rationality, choice architecture, cognitive biases, discrimination, and herd mentality.
• Behavior economics is crafted around many principles including framing, heuristics, loss aversion, and the sunk-cost fallacy.
• Companies use information from behavioral economics to price their goods, craft their commercials, and package their products.

Investopedia / Mira Norian

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 that people, given their preferences and constraints, are capable of making rational decisions by effectively weighing the costs and benefits of each option available to them. The final decision made will be the best choice for the individual. The rational person has self-control and is unmoved by emotions and external factors and, hence, knows what is best for himself. Alas, behavioral economics explains that humans are not rational and are incapable of making good decisions.

Because humans are emotional and easily distracted beings, they make decisions that are not in their self-interest . For example, according to the rational choice theory, if Charles wants to lose weight and is equipped with information about the number of calories available in each edible product, he will opt only for food products with minimal calories.

Behavioral economics states that even if Charles wants to lose weight and sets his mind on eating healthy food going forward, his end behavior will be subject to cognitive bias, emotions, and social influences. If a commercial on TV advertises a brand of ice cream at an attractive price and quotes that all human beings need 2,000 calories a day to function effectively after all, the mouth-watering ice cream image, price, and seemingly valid statistics may lead Charles to fall into the sweet temptation and fall off of the weight loss bandwagon , showing his lack of self-control.

Behavioral economics and behavioral finance are often driven by many of the same factors, though behavior finance is often more related to financial markets.

History of Behavioral Economics

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 that people are often overconfident with their own abilities, noting "the chance of gain is by every man more or less over-valued, and the chance of loss is by most men under-valued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth.” In this sense, Smith believed individuals are not rational with their own limitations.

More recently, behavioral economics took shape as early as the 1960's when several economists identified key biases when recalling information. This idea called availability heuristic was explained by Amos Tversky and Daniel Kahneman, and it leads individuals to irrationally interpret data. For example, shark attacks tend to happen less than people think, but headlines may make people feel otherwise. Tversky and Kahneman are also credited with developing prospect theory, how people are potentially more adverse to losses as opposed to receiving an equal win.

In 2017, Richard Thaler received the Sveriges Riksbank Price in Economics Science for his work in identifying factors that guide individuals' economic decision-making. Thaler's work included limited rationality, social preferences, lack of self-control, and individual decision-making.

There are often five factors that are cited when analyzing how individual behavior is influenced.

Bounded Rationality

Bounded rationality is the idea that individuals make decisions based on the knowledge they have. Unfortunately, this information is often limited, whether by the individual's lack of expertise of lack of available information. In regards to finance and investing, the same public information is available to everyone, though investors may not know true circumstances of what is happening with a company internally.

Choice Architecture

People can be easily manipulated, and this is often on display in the way promoters craft incentives or deals to make consumers buy certain products. Consider how a cracker display may be presented right next to the cheese aisle within a supermarket. This type of design is meant to steer a consumer into making a decision based on a choreographed demonstration often between complementary goods.

Cognitive Bias

Whether people realize it or not, everybody makes decisions that are influenced by cognitive bias . Consider the choice of choosing between two companies to invest in. Behavioral economics holds the theory that the color of the logo, the name of the CEO, or the city in which each company is headquartered in may stir up an unknown bias that yields us to choose the other company.

Discrimination

In a similar light, behavioral economics is often associated with discrimination. People perceive things, events, or other people through their own lenses , potentially discriminating towards others because they simply favor a different alternative. This does not necessarily mean the alternative is a better option, though.

Herd Mentality

Many consumer decisions are influenced by what other people are doing. Whether it is the fear of missing out or whether others want to be part of a larger collective, herd mentality is the belief that individual decisions are swayed based on what other people do, not necessarily on what is the best outcome. After all, it is much easier rooting for your favorite team even if they haven't won a championship in a while as long as other fans share your pain.

The media plays a critical part in behavioral economics. Consider how a single headline can grab your attention and make you want to either pursue or avoid a product.

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.

Framing is the principle of how something is presented to an individual. This behavioral economics concept presents a cognitive bias in that an outcome may be determined based on the structure of how something has been presented. Consider how someone may feel about the two following statements about Babe Ruth, both of which are describing the same thing:

• Babe Ruth failed to get a hit in nearly two-thirds of his at-bats.
• Babe Ruth, one of the greatest baseball players of all time, hit .342 in his lifetime.

Heuristics is a complicated field, but it simply means that humans tend to make decisions using mental shortcuts as opposed to using long, rational, optimal reasoning. Most often, people latch onto something as true, even if it may no longer be the case. In this situation, it's easier for the consumer to continue what they've been doing as opposed to realizing a more beneficial situation exists.

Loss Aversion

Behavioral economics is rooted in the notion that people do not like losses. In fact, people are loss averse to the point that an economic outcome of one financial value that is negative outweighs the emotional toll of the same financial value but positive. For example, some people feel there is much stronger negative emotions associated with losing a $20 bill compared to finding a $20 bill on the ground.

Market Inefficiencies

For lack of a better phrase, the market can take advantage of behavior economics. For this reason, market inefficiencies play a crucial part in behavior economics. Consider how overpriced stocks may still lure in investors due to drops in P/E ratios . Though the trading multiple may still be abnormally high, investors may think something in the market is more reasonable simply because it is lower. For example, a stock worth $20 may be trading at $50. Should the price to $40, investors may feel this is a great opportunity.

Mental Accounting

Consumers and investors may change their spending and trading tendencies based on circumstances. Though this is fair, often times it is illogical and shapes many aspects of behavioral economics. For example, after receiving one's annual bonus, an investor may choose to invest in riskier stocks. This mental accounting exercise led an investor to make a decision based on their circumstances, not their long-term strategy.

Sunk-Cost Fallacy

The sunk-cost fallacy is the emotional attachment to costs that have been incurred in the past. Consumers and investors tend to have a harder time "letting go" of failed investments or committed capital. Consider a failed stock that was purchased at $100/share that is now worth $15/share. An investor may not feel compelled to buy in at $15/share because they think the company is not worth that. However, they are unwilling to sell their shares bought at $100/share due to an emotional attachment to that committed capital.

When performing a cost/benefit analysis, sunk costs are ignored entirely. That is because the price has already been paid and, if it can not be recovered, it has no financial bearing on the future outcome of a decision.

Applications of Behavioral Economics

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.

Product Packaging and Distribution

Consider a soap manufacturer who produces the same soap but markets them in two different packages to appeal to multiple target groups. One package advertises the soap for all soap users, the other for consumers with sensitive skin. The latter target would not have purchased the product if the package did not specify that the soap was for sensitive skin. They opt for the soap with the sensitive skin label even though it’s the exact same product in the general package.

What Do Behavioral Economists Do?

Behavioral economists work to understand what consumers do and why they make the choices they make. Such economists also assist markets in helping consumers make those decisions. Behavioral economists may work for the government to shape public policy to protect consumers. Other times, they may work for private companies and assist in fostering sales growth.

What Is the Goal of Behavioral Economics?

The goal of behavioral economics is to understand why humans make the decisions they do . There are usually outcomes that are the best for people and many times, people do not choose that outcome. Behavioral economics is an incredibly complex and sometimes inexplainable science of why people do things and why they choose to not be rational.

What Is the Difference Between Behavioral Economics and Psycology?

Both behavioral economics and psychology refer to the dispositions, emotions, and decision-making of individuals. Behavior economics is a much more niche field that studies the financial decision-making of an individual, while psychology may cover any aspect of human rationality.

What Is the Downside to Behavioral Economics?

One downside to behavioral economics is that it can be used to deceive or manipulate people and their decision-making. Though people are often not rational, this irrationality may be predictable. Companies can choose to exploit this by packaging their products in a certain way, pricing their goods at specific levels, or customizing their marketing to attract certain markets.

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.

Journal of Economic Perspectives. " Adam Smith, Behavioral Economist ."

Science Magazine. " The Framing of Decisions and the Psychology of Choice. "

Baseball Reference. " Babe Ruth ."

• Terms of Service
• Editorial Policy
• Privacy Policy

• Utility Menu

44d3fa3df9f06a3117ed3d2ad6c71ecc

• Administration

Behavioral Economics

Raj Chetty is the William A. Ackman Professor of Public Economics at Harvard University. He is also the Director of Opportunity Insights, which uses “big...

Benjamin Enke

Benjamin Enke is an Assistant Professor at Harvard's Department of Economics. Ben received his Ph.D. in Economics from Bonn in 2016. His research focuses...

Xavier Gabaix

Xavier Gabaix is Pershing Square Professor of Economics and Finance at Harvard’s economics department. He received his undergraduate degree in mathematics from the Ecole Normale Supérieure (Paris) and obtained his PhD in economics from Harvard University.... Read more about Xavier Gabaix

Jerry Green

Jerry Green is the John Leverett Professor in the University and the David A. Wells Professor of Political Economy in the Department of Economics.... Read more about Jerry Green

David Laibson

David Laibson is a member of the National Bureau of Economic Research, where he is Research Associate in the Asset Pricing, Economic Fluctuations, and Aging Working Groups.  Laibsonʼs research focuses on the topic of behavioral economics, and he is a co-leader of the Harvard University Foundations of Human Behavior Initiative. ... Read more about David Laibson

Prior to joining the Economics Department Faculty, Shengwu Li was a Junior Fellow of the Society of Fellows.

Staff Support:...

Matthew Rabin

Matthew Rabin is the Pershing Square Professor of Behavioral Economics in the Harvard Economics Department and Harvard Business School.... Read more about Matthew Rabin

Andrei Shleifer

Andrei Shleifer has worked in the areas of comparative corporate governance, law and finance, behavioral finance, as well as institutional economics. He has published six books, including The Grabbing Hand (with Robert Vishny), and Inefficient Markets: An Introduction to Behavioral Finance , as well as over a hundred articles. In 1999, Shleifer won the John Bates Clark medal of the American Economic Association.... Read more about Andrei Shleifer

Tomasz Strzalecki

Tomasz Strzalecki's research interests are in decision theory and economic theory. He has focused on ambiguity aversion, temporal preferences, and bounded rationality.... Read more about Tomasz Strzalecki

Eric Unverzagt

Faculty Assistant to Professors  Pallais ,...

David Y. Yang is a Professor in the Department of Economics at Harvard University and Director of the Center for History and Economics at Harvard. David...

• Behavioral Economics (11)
• Contracts and Organization (1)
• Economic Development (7)
• Econometrics (6)
• Economic History (7)
• Financial Economics (9)
• Industrial Organization (3)
• International Economics (6)
• Labor Economics (11)
• Macroeconomics (16)
• Political Economy (9)
• Public Economics (9)
• Theory (10)

Behavioral Economics

Behavioral Economics is the combination of psychology and economics that investigates what happens in markets in which some of the agents display human limitations and complications. We begin with a preliminary question about relevance. Does some combination of market forces, learning and evolution render these human qualities irrelevant? No. Because of limits of arbitrage less than perfect agents survive and influence market outcomes. We then discuss three important ways in which humans deviate from the standard economic model. Bounded rationality reflects the limited cognitive abilities that constrain human problem solving. Bounded willpower captures the fact that people sometimes make choices that are not in their long-run interest. Bounded self-interest incorporates the comforting fact that humans are often willing to sacrifice their own interests to help others. We then illustrate how these concepts can be applied in two settings: finance and savings. Financial markets have greater arbitrage opportunities than other markets, so behavioral factors might be thought to be less important here, but we show that even here the limits of arbitrage create anomalies that the psychology of decision making helps explain. Since saving for retirement requires both complex calculations and willpower, behavioral factors are essential elements of any complete descriptive theory.

• Acknowledgements and Disclosures

MARC RIS BibTeΧ

Download Citation Data

Published Versions

International Encyclopedia of SocialSciences, Pergamon Press, 1st edition, October 1, 2001: 1094-1100.

More from NBER

In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter , the NBER Digest , the Bulletin on Retirement and Disability , the Bulletin on Health , and the Bulletin on Entrepreneurship  — as well as online conference reports , video lectures , and interviews .

• Search Menu
• Sign in through your institution
• Advance articles
• Featured articles
• Virtual Issues
• Browse content in B - History of Economic Thought, Methodology, and Heterodox Approaches
• Browse content in B4 - Economic Methodology
• B49 - Other
• Browse content in C - Mathematical and Quantitative Methods
• Browse content in C0 - General
• C01 - Econometrics
• Browse content in C1 - Econometric and Statistical Methods and Methodology: General
• C10 - General
• C11 - Bayesian Analysis: General
• C12 - Hypothesis Testing: General
• C13 - Estimation: General
• C14 - Semiparametric and Nonparametric Methods: General
• C15 - Statistical Simulation Methods: General
• Browse content in C2 - Single Equation Models; Single Variables
• C21 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
• C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• C23 - Panel Data Models; Spatio-temporal Models
• C26 - Instrumental Variables (IV) Estimation
• Browse content in C3 - Multiple or Simultaneous Equation Models; Multiple Variables
• C31 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
• C33 - Panel Data Models; Spatio-temporal Models
• C34 - Truncated and Censored Models; Switching Regression Models
• C35 - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
• C36 - Instrumental Variables (IV) Estimation
• Browse content in C4 - Econometric and Statistical Methods: Special Topics
• C41 - Duration Analysis; Optimal Timing Strategies
• C44 - Operations Research; Statistical Decision Theory
• Browse content in C5 - Econometric Modeling
• C50 - General
• C51 - Model Construction and Estimation
• C52 - Model Evaluation, Validation, and Selection
• C53 - Forecasting and Prediction Methods; Simulation Methods
• C54 - Quantitative Policy Modeling
• C55 - Large Data Sets: Modeling and Analysis
• C57 - Econometrics of Games and Auctions
• Browse content in C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
• C61 - Optimization Techniques; Programming Models; Dynamic Analysis
• C62 - Existence and Stability Conditions of Equilibrium
• C63 - Computational Techniques; Simulation Modeling
• C67 - Input-Output Models
• C68 - Computable General Equilibrium Models
• Browse content in C7 - Game Theory and Bargaining Theory
• C70 - General
• C72 - Noncooperative Games
• C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
• C78 - Bargaining Theory; Matching Theory
• C79 - Other
• Browse content in C8 - Data Collection and Data Estimation Methodology; Computer Programs
• C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
• C83 - Survey Methods; Sampling Methods
• Browse content in C9 - Design of Experiments
• C90 - General
• C91 - Laboratory, Individual Behavior
• C92 - Laboratory, Group Behavior
• C93 - Field Experiments
• Browse content in D - Microeconomics
• Browse content in D0 - General
• D01 - Microeconomic Behavior: Underlying Principles
• D02 - Institutions: Design, Formation, Operations, and Impact
• D03 - Behavioral Microeconomics: Underlying Principles
• Browse content in D1 - Household Behavior and Family Economics
• D11 - Consumer Economics: Theory
• D12 - Consumer Economics: Empirical Analysis
• D13 - Household Production and Intrahousehold Allocation
• D14 - Household Saving; Personal Finance
• D15 - Intertemporal Household Choice: Life Cycle Models and Saving
• D18 - Consumer Protection
• Browse content in D2 - Production and Organizations
• D21 - Firm Behavior: Theory
• D22 - Firm Behavior: Empirical Analysis
• D23 - Organizational Behavior; Transaction Costs; Property Rights
• D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
• D25 - Intertemporal Firm Choice: Investment, Capacity, and Financing
• D29 - Other
• Browse content in D3 - Distribution
• D30 - General
• D31 - Personal Income, Wealth, and Their Distributions
• Browse content in D4 - Market Structure, Pricing, and Design
• D40 - General
• D41 - Perfect Competition
• D42 - Monopoly
• D43 - Oligopoly and Other Forms of Market Imperfection
• D44 - Auctions
• D47 - Market Design
• Browse content in D5 - General Equilibrium and Disequilibrium
• D50 - General
• D51 - Exchange and Production Economies
• D52 - Incomplete Markets
• D53 - Financial Markets
• D57 - Input-Output Tables and Analysis
• D58 - Computable and Other Applied General Equilibrium Models
• Browse content in D6 - Welfare Economics
• D60 - General
• D61 - Allocative Efficiency; Cost-Benefit Analysis
• D62 - Externalities
• D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• D64 - Altruism; Philanthropy
• Browse content in D7 - Analysis of Collective Decision-Making
• D70 - General
• D71 - Social Choice; Clubs; Committees; Associations
• D72 - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• D73 - Bureaucracy; Administrative Processes in Public Organizations; Corruption
• D74 - Conflict; Conflict Resolution; Alliances; Revolutions
• D78 - Positive Analysis of Policy Formulation and Implementation
• Browse content in D8 - Information, Knowledge, and Uncertainty
• D80 - General
• D81 - Criteria for Decision-Making under Risk and Uncertainty
• D82 - Asymmetric and Private Information; Mechanism Design
• D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• D84 - Expectations; Speculations
• D85 - Network Formation and Analysis: Theory
• D86 - Economics of Contract: Theory
• Browse content in D9 - Micro-Based Behavioral Economics
• D90 - General
• D91 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
• D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing
• Browse content in E - Macroeconomics and Monetary Economics
• Browse content in E0 - General
• E03 - Behavioral Macroeconomics
• Browse content in E1 - General Aggregative Models
• E10 - General
• E12 - Keynes; Keynesian; Post-Keynesian
• E13 - Neoclassical
• E17 - Forecasting and Simulation: Models and Applications
• Browse content in E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
• E20 - General
• E21 - Consumption; Saving; Wealth
• E22 - Investment; Capital; Intangible Capital; Capacity
• E23 - Production
• E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• E25 - Aggregate Factor Income Distribution
• E26 - Informal Economy; Underground Economy
• E27 - Forecasting and Simulation: Models and Applications
• Browse content in E3 - Prices, Business Fluctuations, and Cycles
• E30 - General
• E31 - Price Level; Inflation; Deflation
• E32 - Business Fluctuations; Cycles
• E37 - Forecasting and Simulation: Models and Applications
• Browse content in E4 - Money and Interest Rates
• E40 - General
• E41 - Demand for Money
• E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
• E43 - Interest Rates: Determination, Term Structure, and Effects
• E44 - Financial Markets and the Macroeconomy
• E49 - Other
• Browse content in E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
• E50 - General
• E51 - Money Supply; Credit; Money Multipliers
• E52 - Monetary Policy
• E58 - Central Banks and Their Policies
• Browse content in E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
• E60 - General
• E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
• E62 - Fiscal Policy
• E65 - Studies of Particular Policy Episodes
• Browse content in E7 - Macro-Based Behavioral Economics
• E70 - General
• E71 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
• Browse content in F - International Economics
• Browse content in F1 - Trade
• F10 - General
• F11 - Neoclassical Models of Trade
• F12 - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
• F13 - Trade Policy; International Trade Organizations
• F14 - Empirical Studies of Trade
• F15 - Economic Integration
• F16 - Trade and Labor Market Interactions
• F17 - Trade Forecasting and Simulation
• F18 - Trade and Environment
• F19 - Other
• Browse content in F2 - International Factor Movements and International Business
• F20 - General
• F21 - International Investment; Long-Term Capital Movements
• F22 - International Migration
• F23 - Multinational Firms; International Business
• Browse content in F3 - International Finance
• F30 - General
• F31 - Foreign Exchange
• F32 - Current Account Adjustment; Short-Term Capital Movements
• F33 - International Monetary Arrangements and Institutions
• F34 - International Lending and Debt Problems
• F36 - Financial Aspects of Economic Integration
• Browse content in F4 - Macroeconomic Aspects of International Trade and Finance
• F40 - General
• F41 - Open Economy Macroeconomics
• F42 - International Policy Coordination and Transmission
• F43 - Economic Growth of Open Economies
• F44 - International Business Cycles
• Browse content in F5 - International Relations, National Security, and International Political Economy
• F50 - General
• F53 - International Agreements and Observance; International Organizations
• Browse content in F6 - Economic Impacts of Globalization
• F60 - General
• F62 - Macroeconomic Impacts
• F63 - Economic Development
• F64 - Environment
• F65 - Finance
• Browse content in G - Financial Economics
• Browse content in G0 - General
• G01 - Financial Crises
• G02 - Behavioral Finance: Underlying Principles
• Browse content in G1 - General Financial Markets
• G10 - General
• G11 - Portfolio Choice; Investment Decisions
• G12 - Asset Pricing; Trading volume; Bond Interest Rates
• G13 - Contingent Pricing; Futures Pricing
• G14 - Information and Market Efficiency; Event Studies; Insider Trading
• G15 - International Financial Markets
• G18 - Government Policy and Regulation
• Browse content in G2 - Financial Institutions and Services
• G20 - General
• G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• G22 - Insurance; Insurance Companies; Actuarial Studies
• G23 - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
• G28 - Government Policy and Regulation
• Browse content in G3 - Corporate Finance and Governance
• G30 - General
• G31 - Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
• G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• G33 - Bankruptcy; Liquidation
• G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
• G38 - Government Policy and Regulation
• Browse content in G4 - Behavioral Finance
• G40 - General
• G41 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
• Browse content in H - Public Economics
• Browse content in H0 - General
• H00 - General
• Browse content in H1 - Structure and Scope of Government
• H11 - Structure, Scope, and Performance of Government
• Browse content in H2 - Taxation, Subsidies, and Revenue
• H20 - General
• H21 - Efficiency; Optimal Taxation
• H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
• H25 - Business Taxes and Subsidies
• H26 - Tax Evasion and Avoidance
• Browse content in H3 - Fiscal Policies and Behavior of Economic Agents
• H30 - General
• H31 - Household
• Browse content in H4 - Publicly Provided Goods
• H41 - Public Goods
• Browse content in H5 - National Government Expenditures and Related Policies
• H50 - General
• H51 - Government Expenditures and Health
• H52 - Government Expenditures and Education
• H53 - Government Expenditures and Welfare Programs
• H55 - Social Security and Public Pensions
• H56 - National Security and War
• Browse content in H6 - National Budget, Deficit, and Debt
• H60 - General
• H63 - Debt; Debt Management; Sovereign Debt
• Browse content in H7 - State and Local Government; Intergovernmental Relations
• H71 - State and Local Taxation, Subsidies, and Revenue
• H75 - State and Local Government: Health; Education; Welfare; Public Pensions
• Browse content in H8 - Miscellaneous Issues
• H81 - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
• Browse content in I - Health, Education, and Welfare
• Browse content in I0 - General
• I00 - General
• Browse content in I1 - Health
• I10 - General
• I11 - Analysis of Health Care Markets
• I12 - Health Behavior
• I13 - Health Insurance, Public and Private
• I14 - Health and Inequality
• I15 - Health and Economic Development
• I18 - Government Policy; Regulation; Public Health
• Browse content in I2 - Education and Research Institutions
• I20 - General
• I21 - Analysis of Education
• I22 - Educational Finance; Financial Aid
• I23 - Higher Education; Research Institutions
• I24 - Education and Inequality
• I25 - Education and Economic Development
• I26 - Returns to Education
• I28 - Government Policy
• Browse content in I3 - Welfare, Well-Being, and Poverty
• I30 - General
• I31 - General Welfare
• I32 - Measurement and Analysis of Poverty
• I38 - Government Policy; Provision and Effects of Welfare Programs
• I39 - Other
• Browse content in J - Labor and Demographic Economics
• Browse content in J0 - General
• J00 - General
• J01 - Labor Economics: General
• J08 - Labor Economics Policies
• Browse content in J1 - Demographic Economics
• J10 - General
• J11 - Demographic Trends, Macroeconomic Effects, and Forecasts
• J12 - Marriage; Marital Dissolution; Family Structure; Domestic Abuse
• J13 - Fertility; Family Planning; Child Care; Children; Youth
• J14 - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
• J15 - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
• J16 - Economics of Gender; Non-labor Discrimination
• J17 - Value of Life; Forgone Income
• Browse content in J2 - Demand and Supply of Labor
• J20 - General
• J21 - Labor Force and Employment, Size, and Structure
• J22 - Time Allocation and Labor Supply
• J23 - Labor Demand
• J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
• Browse content in J3 - Wages, Compensation, and Labor Costs
• J30 - General
• J31 - Wage Level and Structure; Wage Differentials
• J32 - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
• J33 - Compensation Packages; Payment Methods
• J38 - Public Policy
• Browse content in J4 - Particular Labor Markets
• J41 - Labor Contracts
• J42 - Monopsony; Segmented Labor Markets
• J44 - Professional Labor Markets; Occupational Licensing
• J47 - Coercive Labor Markets
• Browse content in J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining
• J50 - General
• J52 - Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
• Browse content in J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers
• J60 - General
• J61 - Geographic Labor Mobility; Immigrant Workers
• J62 - Job, Occupational, and Intergenerational Mobility
• J63 - Turnover; Vacancies; Layoffs
• J64 - Unemployment: Models, Duration, Incidence, and Job Search
• J65 - Unemployment Insurance; Severance Pay; Plant Closings
• J68 - Public Policy
• Browse content in J7 - Labor Discrimination
• J71 - Discrimination
• Browse content in J8 - Labor Standards: National and International
• J81 - Working Conditions
• J82 - Labor Force Composition
• J83 - Workers' Rights
• Browse content in K - Law and Economics
• Browse content in K0 - General
• K00 - General
• Browse content in K1 - Basic Areas of Law
• K14 - Criminal Law
• Browse content in K3 - Other Substantive Areas of Law
• K31 - Labor Law
• K33 - International Law
• K35 - Personal Bankruptcy Law
• Browse content in K4 - Legal Procedure, the Legal System, and Illegal Behavior
• K40 - General
• K41 - Litigation Process
• K42 - Illegal Behavior and the Enforcement of Law
• Browse content in L - Industrial Organization
• Browse content in L0 - General
• L00 - General
• Browse content in L1 - Market Structure, Firm Strategy, and Market Performance
• L10 - General
• L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
• L12 - Monopoly; Monopolization Strategies
• L13 - Oligopoly and Other Imperfect Markets
• L14 - Transactional Relationships; Contracts and Reputation; Networks
• L15 - Information and Product Quality; Standardization and Compatibility
• Browse content in L2 - Firm Objectives, Organization, and Behavior
• L20 - General
• L22 - Firm Organization and Market Structure
• L23 - Organization of Production
• L25 - Firm Performance: Size, Diversification, and Scope
• Browse content in L3 - Nonprofit Organizations and Public Enterprise
• L31 - Nonprofit Institutions; NGOs; Social Entrepreneurship
• Browse content in L4 - Antitrust Issues and Policies
• L41 - Monopolization; Horizontal Anticompetitive Practices
• L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
• L43 - Legal Monopolies and Regulation or Deregulation
• Browse content in L5 - Regulation and Industrial Policy
• L50 - General
• L51 - Economics of Regulation
• Browse content in L6 - Industry Studies: Manufacturing
• L60 - General
• L62 - Automobiles; Other Transportation Equipment; Related Parts and Equipment
• L63 - Microelectronics; Computers; Communications Equipment
• L65 - Chemicals; Rubber; Drugs; Biotechnology
• Browse content in L7 - Industry Studies: Primary Products and Construction
• L71 - Mining, Extraction, and Refining: Hydrocarbon Fuels
• Browse content in L8 - Industry Studies: Services
• L81 - Retail and Wholesale Trade; e-Commerce
• L82 - Entertainment; Media
• L86 - Information and Internet Services; Computer Software
• Browse content in L9 - Industry Studies: Transportation and Utilities
• L93 - Air Transportation
• L94 - Electric Utilities
• L96 - Telecommunications
• Browse content in M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
• Browse content in M0 - General
• M00 - General
• Browse content in M1 - Business Administration
• M11 - Production Management
• M14 - Corporate Culture; Social Responsibility
• Browse content in M2 - Business Economics
• M21 - Business Economics
• Browse content in M3 - Marketing and Advertising
• M31 - Marketing
• M37 - Advertising
• Browse content in M5 - Personnel Economics
• M50 - General
• M51 - Firm Employment Decisions; Promotions
• M52 - Compensation and Compensation Methods and Their Effects
• M54 - Labor Management
• M55 - Labor Contracting Devices
• Browse content in N - Economic History
• Browse content in N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
• N10 - General, International, or Comparative
• N13 - Europe: Pre-1913
• Browse content in N2 - Financial Markets and Institutions
• N20 - General, International, or Comparative
• Browse content in N3 - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy
• N31 - U.S.; Canada: Pre-1913
• N32 - U.S.; Canada: 1913-
• N33 - Europe: Pre-1913
• N34 - Europe: 1913-
• Browse content in N4 - Government, War, Law, International Relations, and Regulation
• N42 - U.S.; Canada: 1913-
• N43 - Europe: Pre-1913
• N44 - Europe: 1913-
• N45 - Asia including Middle East
• Browse content in N9 - Regional and Urban History
• N90 - General, International, or Comparative
• N92 - U.S.; Canada: 1913-
• N94 - Europe: 1913-
• Browse content in O - Economic Development, Innovation, Technological Change, and Growth
• Browse content in O1 - Economic Development
• O10 - General
• O11 - Macroeconomic Analyses of Economic Development
• O12 - Microeconomic Analyses of Economic Development
• O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
• O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
• O15 - Human Resources; Human Development; Income Distribution; Migration
• O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
• O18 - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
• Browse content in O2 - Development Planning and Policy
• O23 - Fiscal and Monetary Policy in Development
• Browse content in O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights
• O30 - General
• O31 - Innovation and Invention: Processes and Incentives
• O32 - Management of Technological Innovation and R&D
• O33 - Technological Change: Choices and Consequences; Diffusion Processes
• O34 - Intellectual Property and Intellectual Capital
• O38 - Government Policy
• Browse content in O4 - Economic Growth and Aggregate Productivity
• O40 - General
• O41 - One, Two, and Multisector Growth Models
• O42 - Monetary Growth Models
• O43 - Institutions and Growth
• O44 - Environment and Growth
• O47 - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
• Browse content in O5 - Economywide Country Studies
• O51 - U.S.; Canada
• O55 - Africa
• Browse content in P - Economic Systems
• Browse content in P0 - General
• P00 - General
• Browse content in P1 - Capitalist Systems
• P16 - Political Economy
• Browse content in P2 - Socialist Systems and Transitional Economies
• P26 - Political Economy; Property Rights
• P4 - Other Economic Systems
• Browse content in Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
• Browse content in Q1 - Agriculture
• Q15 - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
• Q16 - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
• Browse content in Q3 - Nonrenewable Resources and Conservation
• Q33 - Resource Booms
• Browse content in Q4 - Energy
• Q41 - Demand and Supply; Prices
• Q43 - Energy and the Macroeconomy
• Browse content in Q5 - Environmental Economics
• Q51 - Valuation of Environmental Effects
• Q52 - Pollution Control Adoption Costs; Distributional Effects; Employment Effects
• Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
• Q54 - Climate; Natural Disasters; Global Warming
• Q55 - Technological Innovation
• Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
• Q58 - Government Policy
• Browse content in R - Urban, Rural, Regional, Real Estate, and Transportation Economics
• Browse content in R1 - General Regional Economics
• R10 - General
• R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
• R12 - Size and Spatial Distributions of Regional Economic Activity
• R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
• R15 - Econometric and Input-Output Models; Other Models
• Browse content in R2 - Household Analysis
• R21 - Housing Demand
• R23 - Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
• Browse content in R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location
• R31 - Housing Supply and Markets
• R33 - Nonagricultural and Nonresidential Real Estate Markets
• Browse content in R4 - Transportation Economics
• R41 - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
• R48 - Government Pricing and Policy
• Browse content in R5 - Regional Government Analysis
• R51 - Finance in Urban and Rural Economies
• Browse content in Z - Other Special Topics
• Browse content in Z1 - Cultural Economics; Economic Sociology; Economic Anthropology
• Z10 - General
• Z12 - Religion
• Z13 - Economic Sociology; Economic Anthropology; Social and Economic Stratification
• Author Guidelines
• Submission Site
• Open Access
• About The Review of Economic Studies
• Editorial Board
• Advertising and Corporate Services
• Self-Archiving Policy
• Dispatch Dates
• Journals on Oxford Academic
• Books on Oxford Academic

Behavioural Economics

Behavioural economics is an approach to economic analysis that blends insights from economics and psychology to explain how people make everyday economic decisions, and how these affect economic outcomes. The collection of articles below covers a variety of research in this area such as asking why people vote, to how much monetary and non-monetary incentives motivate effort, as well as the topics of social welfare dependency, competition for consumer attention, and tax manipulation. These articles have been collated by the editors of The Review of Economic Studies and are free to read until the end of March 2019.

Endogenous Depth of Reasoning Larbi Alaoui and Antonio Penta

The Sunk-Cost Fallacy in Penny Auctions Ned Augenblick

Competition for Attention Pedro Bordalo, Nicola Gennaioli, and Andrei Shleifer

Welfare Dependence and Self-Control: An Empirical Analysis Marc K. Chan

The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects Ernesto Dal Bó, Pedro Dal Bó, and Erik Eyster

Voting to Tell Others Stefano Dellavigna, John A. List, Ulrike Malmendier, and Gautam Rao

What Motivates Effort? Evidence and Expert Forecasts Stefano DellaVigna and Devin Pope

Excusing Selfishness in Charitable Giving: The Role of Risk Christine L. Exley

Inferior Products and Profitable Deception Paul Heidhues, Botond K?szegi, and Takeshi Murooka

Expectations-Based Reference-Dependent Life-Cycle Consumption Michaela Pagel

Quantifying Loss-Averse Tax Manipulation Alex Rees-Jones

“Data Monkeys”: A Procedural Model of Extrapolation from Partial Statistics Ran Spiegler

• Recommend to your Library
• Journals Career Network

Affiliations

• Online ISSN 1467-937X
• Print ISSN 0034-6527
• Copyright © 2024 Review of Economic Studies Ltd
• About Oxford Academic
• Publish journals with us
• University press partners
• What we publish
• New features  
• Open access
• Institutional account management
• Rights and permissions
• Get help with access
• Accessibility
• Advertising
• Media enquiries
• Oxford University Press
• Oxford Languages
• University of Oxford

Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide

• Copyright © 2024 Oxford University Press
• Cookie settings
• Cookie policy
• Privacy policy
• Legal notice

This Feature Is Available To Subscribers Only

Sign In or Create an Account

This PDF is available to Subscribers Only

For full access to this pdf, sign in to an existing account, or purchase an annual subscription.

Behavioral Economics

• Reference work entry
• First Online: 01 January 2022
• Cite this reference work entry

• Jennifer E. Miller 2 ,
• Elinor Amit 3 , 4 &
• Ann-Christin Posten 4  

239 Accesses

Behavioral economics explores what affects people’s economic decisions and the consequences of those decisions for market prices, returns, and resource allocation. Traditional economic research assumes that people’s economic decisions are based on the rule of maximizing utility. Behavioral economics, in contrast, neither assumes that people are good in utility maximization nor that it is people’s only goal. Using empirical tools, behavioral economists have shown rather that people have psychological biases, limited cognitive resources, and care about other values such as fairness, all of which might undermine their utility maximization behavior. Behavioral economic research and insights began slowly influencing the study and practice of business ethics in the 1990s, but have not yet had a substantial and widespread impact on the field of bioethics. Further study is needed on the intersections of bioethics and behavioral ethics to better understand the implications and impact each field can have on the other.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

• Available as PDF
• Read on any device
• Instant download
• Own it forever
• Available as EPUB and PDF
• Durable hardcover edition
• Dispatched in 3 to 5 business days
• Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Behavioral Economics, Public Policy, and Basic Decision-Making: A Critical Narrative

Behavioral economics and the nature of neoclassical paradigm

Amit, E., & Greene, J. D. (2012). You see, the ends don’t justify the means visual imagery and moral judgment. Psychological Science, 23 (8), 861–868.

Google Scholar  

Ashraf, N., Camerer, C. F., & Loewenstein, G. (2005). Adam Smith, behavioral economist. Journal of Economic Perspectives, 19 , 131–145.

Bazerman, M., & Gino, F. (2012). Behavioral ethics: Toward a deeper understanding of moral judgment and dishonest (Working Paper 12–054). Harvard Business School.

Bolton, G. E., & Ockenfels, A. (2000). ERC: A theory of equity, reciprocity, and competition. American Economic Review, 90 , 166–193.

Cialdini, R. B., Reno, R. R., & Kallgren, C. A. (1990). A focus theory of normative conduct: Recycling the concept of norms to reduce littering in public places. Journal of Personality and Social Psychology, 58 , 1015–1026.

Kahneman, D. (2011). Thinking fast and slow . New York: Farrar, Straus and Giroux.

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society, 47 , 263–291.

Messick, D. M., & Tenbrunsel, A. E. (1996). Codes of conduct: Behavioral research into business ethics . New York: Russel Sage.

Paharia, N., Kassam, K. S., Greene, J. D., & Bazerman, M. H. (2009). Dirty work, clean hands: The moral psychology of indirect agency. Organizational Behavior and Human Decision Processes, 109 , 134–141.

Rieger, M. O., Wang, M., & Hens, T. (2015). Risk preferences around the world. Management Science, 61 , 637–648.

Schäfer, M., Haun, D. B. M., & Tomasello, M. (2015). Fair is not fair everywhere. Psychological Science, 26 , 1252–1260.

Simon, H. A. (1982). Models of bounded rationality: Empirically grounded economic reason (Vol. 3). Cambridge: MIT Press.

Stok, F. M., De Ridder, D. T. D., de Vet, E., & de Wit, J. B. F. (2014). Don’t tell me what I should do, but what others do: The influence of descriptive and injunctive peer norms on fruit consumption in adolescents. British Journal of Health Psychology, 19 , 52–64.

Sunstein, C. R. (2015). Nudges, agency, and abstraction: A reply to critics. Review of Philosophy and Psychology, 6 , 511–529.

Thaler, R. H., & Sunstein, C. R. (2009). Nudge . New York: Penguin Books.

Further Readings

Evans, J. S. B. T. (2008). Dual-processing accounts of reasoning, judgment, and social cognition. Annual Review of Psychology, 59 , 255–278.

Sloman, S. A. (1996). The empirical case for two systems of reasoning. Psychological Bulletin, 119 , 3–22.

Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185 , 1124–1131.

Download references

Author information

Authors and affiliations.

Division of Medical Ethics, Department of Population Health, NYU Langone Medical Center, New York, NY, 10016, USA

Jennifer E. Miller

Harvard Medical School, Harvard University, Boston, MA, 02115, USA

Elinor Amit

Edmond J. Safra Center for Ethics, Harvard University, Cambridge, MA, USA

Elinor Amit & Ann-Christin Posten

You can also search for this author in PubMed   Google Scholar

Corresponding authors

Correspondence to Jennifer E. Miller , Elinor Amit or Ann-Christin Posten .

Editor information

Editors and affiliations.

Center for Healthcare Ethics, Duquesne University, Pittsburgh, PA, USA

Henk ten Have

Rights and permissions

Reprints and permissions

Copyright information

© 2016 Springer International Publishing Switzerland

About this entry

Cite this entry.

Miller, J.E., Amit, E., Posten, AC. (2016). Behavioral Economics. In: ten Have, H. (eds) Encyclopedia of Global Bioethics. Springer, Cham. https://doi.org/10.1007/978-3-319-09483-0_37

Download citation

DOI : https://doi.org/10.1007/978-3-319-09483-0_37

Published : 19 January 2022

Publisher Name : Springer, Cham

Print ISBN : 978-3-319-09482-3

Online ISBN : 978-3-319-09483-0

eBook Packages : Religion and Philosophy Reference Module Humanities and Social Sciences Reference Module Humanities

Share this entry

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Publish with us

Policies and ethics

• Find a journal
• Track your research

Warning: The NCBI web site requires JavaScript to function. more...

An official website of the United States government

The .gov means it's official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.

The site is secure. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

• Publications
• Account settings
• Browse Titles

NCBI Bookshelf. A service of the National Library of Medicine, National Institutes of Health.

National Academies of Sciences, Engineering, and Medicine; Division of Behavioral and Social Sciences and Education; Board on Behavioral, Cognitive, and Sensory Sciences; Committee on Future Directions for Applying Behavioral Economics to Policy; Beatty A, Moffitt R, Buttenheim A, editors. Behavioral Economics: Policy Impact and Future Directions. Washington (DC): National Academies Press (US); 2023 Apr 20.

Behavioral Economics: Policy Impact and Future Directions.

• Hardcopy Version at National Academies Press

1 Introduction

Behavioral economics—loosely defined as an approach to examining human behavior and decision making that integrates research and evidence from psychology and related fields such as sociology, anthropology, and cognitive science with economics analysis—has had a growing influence on research and policy. Since economics was established as a scientific discipline in the 19th century, economists have explored the nature of individual choices. In what is called the traditional, conventional, neoclassical, or standard framework, economists have assumed that people make rational decisions in the sense of maximizing possible benefits that are assessed through logical analysis. In this framework, people are assumed to know their own preferences regarding different choices, and those preferences are assumed to be consistent over time. This approach assumes that people correctly perceive the nature of the world around them, at least roughly and with some uncertainty, and that they systematically choose the best alternatives for themselves without being distracted by factors that are irrelevant to the underlying virtues of the alternatives. Economists have always understood that these assumptions about human behavior are only approximate, but that they are useful approximations for many purposes.

Challenges to this framework have come from many other intellectual frameworks, but the one that has had the greatest effect on economics arose around the middle of the 20th century. The work of psychologists Daniel Kahneman and Amos Tversky was an influential counter influence, though many other scholars played a role (as discussed in Chapter 2 ). The influence of this work on the discipline of economics has grown and led economists to take seriously the limitations of the traditional model’s assumptions about behavior (e.g., Rabin, 1998 ; Camerer, 2003 ). Today, behavioral economics is a major subfield within the discipline of economics that has had an influence on the study of individual behavior in the contexts of financial behavior, health, education, and many other domains. Indeed, its influence is so widespread that one observer proposed that “we’re all behavioral economists now” ( Angner, 2019 ).

While the discipline of economics has a strong theoretical element, it is increasingly an applied discipline with a focus on analyzing the effects of government policies and the actions of other parties and institutions, such as commercial firms and nongovernmental organizations. The development of behavioral economics and its application in many domains has led to changes in the structure and evaluation of government policies designed to promote health, safety, well-being, and other societal objectives ( National Research Council, 2012 ; National Academies of Sciences, Engineering, and Medicine, 2017 ). Behavioral economics has been formally integrated into public policy in other countries, starting with the Nudge Unit (now the Behavioral Design Team) in the United Kingdom in 2010. 1 Other countries followed suit, and a growing number of nongovernmental entities, such as the Behavioral Science and Policy Association, are now helping to foster international collaboration among behavioral science researchers and policy makers.

In the United States this influence was evident when the Obama administration established a Social and Behavioral Sciences Team that was charged with looking across agencies for areas where behavioral economics and other ideas from the social and behavioral sciences could be used in tackling urgent policy challenges, such as increasing retirement security for military service members, supporting sound decision making about claiming Social Security benefits, and supporting consumer adoption of renewable energy sources ( Office of the Press Secretary, 2016 ).

Researchers have continued to explore policy applications, accumulating evidence about when, how, and under what circumstances the tools of behavioral economics can help shape policy in desirable ways. Ideas associated with behavioral economics have also become influential beyond academia and policy making: for example, consultants offering to practice it for commercial purposes have proliferated ( Hollingworth & Barker, 2017 ). Given the growing influence of the field, there is a need for an assessment of its contributions.

The Sloan Foundation and the National Institutes of Health requested that the National Academies of Sciences, Engineering, and Medicine conduct a consensus study to review the evidence regarding the application of behavioral economics to public policy objectives. The committee’s charge is shown in Box 1-1 . The Committee on Future Directions for Applying Behavioral Economics to Policy—whose members have expertise in economics, behavioral economics, health policy and behavioral design, psychology, cognitive science (e.g., judgment and decision making), methodology, and public policy—was appointed to carry out the study. This report describes the committee’s conclusions and recommendations and the evidence on which they are based and presents an agenda for future research.

Committee Charge.

• STUDY APPROACH

The committee reviewed a range of information to develop a clear picture of the current state of the field, its theoretical foundations, its contributions, and the issues behavioral economists may need to address. An early question was how the committee should identify the boundaries of the field. Definitions of behavioral economics vary, along with ideas of what it should encompass, when it really began, and what might be considered its essential features. The boundaries of behavioral economics are not precise because work in the field builds and draws on work in economics, psychology, sociology, and other fields. Because the study charge focused on the application of insights that can guide future progress, the committee chose to consider what can be learned from research, whether conducted by economists or other scientists, influenced by findings from domains in the behavioral sciences. Our focus was on exploring applications that use tools, methods, and approaches with a behavioral economics bent, rather than establishing arbitrary distinctions among fields. We explored key developments in the growth of the field and ways in which behavioral economics has differed from traditional economics as both fields have evolved over the past few decades. We used the term “traditional” when there was a need to address distinctions between the behavioral approach and other economic approaches, but we did not establish a filter for classifying different types of work. These issues are discussed in detail in Chapters 2 and 3 .

Reviewing the evidence regarding the application of insights from behavioral economics to key public policy objectives called for an explicit tradeoff between breadth and depth. A systematic review of behavioral economics research across all relevant domains was not feasible. Instead, the committee determined that an overview of a varied subset of fields would best meet the charge of surveying the available research to identify features of clearly successful and less successful applications and assess this body of work, including controversies and questions that have arisen. Thus, the committee focused on the published literature in six domains: health, retirement benefits, social safety net benefits, climate change, education, and criminal justice. Within each of these domains we concentrated on a handful of important topics, recognizing that it would be necessary to leave out other important societal issues in which valuable work has been done (e.g., reducing credit card debt, obesity, behavioral finance). The six domains we selected are all policy domains of prime importance to society in which behavioral ideas have been tested. 2

We supplemented our own information gathering with additional input through informal consultations with experts, a public workshop, 3 and three commissioned papers:

• Linos, E. (2022). Translating evidence into policy and practice.
• Messer, K., Ganguly, D., & Xie, L. (2022). Applications of behavioral economics to climate change mitigation and adaptation .
• Svorenčík, A., & Truc, A. (2022). A history of behavioral economics and its applications: What we know and future directions.
• GUIDE TO THE REPORT

The report is organized in three parts. The first part functions as a primer on behavioral economics, offering an overview of the development of the field: its origins, influential ideas, and evolving influence ( Chapter 2 ); a discussion of its theoretical foundations and core principles ( Chapter 3 ); and an overview of the principal implementation strategies used in policy and practice and how they relate to the foundational ideas from the theoretical literature ( Chapter 4 ). 4

Part II presents the committee’s findings: the evidence from applications of behavioral economics in the six policy domains we chose. It was not possible for the committee to examine the entire landscape of applications, even confining our attention to developments over the past 10 years, as our charge directed. For each of the six domains ( Chapters 5 – 10 ), we reviewed the available literature selectively, seeking synthetic reviews and meta-analyses where they were available and attempting to obtain a clear sense of the primary areas in which behavioral economics tools have been studied. These are not comprehensive literature reviews: our objective was to learn how and under what circumstances behavioral economics ideas have been effectively applied and what can be learned from contexts in which that has not yet happened. We looked for themes and patterns that might be apparent across contexts and drew lessons about the factors that appear to influence success and the matching of tools to objectives. Chapters 5 – 10 each end with a summary of principal findings from the research. The overall themes and the conclusions we drew from this body of work are discussed in Chapter 11 .

Part III provides the committee’s guidance for the future of the field. Chapter 12 addresses ways to strengthen behavioral economics research methods. Chapter 13 discusses the significant challenges associated with implementing tested ideas from behavioral economics research in real-world policy settings. Chapter 14 presents the committee’s general conclusions about the contributions of behavioral economics, offers recommendations for strengthening the field, and suggests directions for future research.

• Angner E. We’re all behavioral economists now. Journal of Economic Methodology. 2019; 26 (3):195–207.
• Camerer CF. Behavioral game theory: Experiments in strategic interaction. Russell Sage Foundation; 2003.
• Hollingworth C, Barker E. The behavioral economics guide 2017. Behavioral Science Solutions Ltd; 2017. How behavioural economics is shaping our lives.
• Linos E. Commissioned paper prepared for the Committee on Future Directions for Applying Behavioral Economics to Policy, National Academies of Sciences, Engineering, and Medicine. 2022. Translating behavioral economics evidence into policy and practice. https://nap ​.nationalacademies ​.org/resource ​/26874/NASEM_Commissioned ​_Report_Linos.pdf .
• Messer K, Ganguly D, Xie L. Commissioned paper prepared for the Committee on Future Directions for Applying Behavioral Economics to Policy, National Academies of Sciences, Engineering, and Medicine. 2022. Applications of behavioral economics to climate change mitigation and adaptation. https://nap ​.nationalacademies ​.org/resource ​/26874/Applying_Behavioral ​_Economics_to ​_Climate_Change_Messer_Ganguly_Xie.pdf .
• National Academies of Sciences, Engineering, and Medicine. Lessons learned from diverse efforts to change social norms and opportunities and strategies to promote behavior change in behavioral health: Proceedings of two workshops. The National Academies Press; 2017. https://doi ​.org/10.17226/24824 . [ PubMed : 29341558 ]
• National Research Council. Using science as evidence in public policy. The National Academies Press; 2012. https://doi ​.org/10.17226/13460 .
• Office of the Press Secretary. Fact sheet: New progress on using behavioral science insights to better serve the American people. The White House; 2016. [September 15, 2016]. https: ​//obamawhitehouse ​.archives.gov/the-press-office ​/2016/09 ​/15/fact-sheet-new-progress-using-behavioral-science-insights-better-serve .
• Rabin M. Psychology and economics. Journal of Economic Literature. 1998; 36 (1):11–46. http://www ​.jstor.org/stable/2564950 .
• Svorenčík A, Truc A. Commissioned paper prepared for the Committee on Future Directions for Applying Behavioral Economics to Policy, National Academies of Sciences, Engineering, and Medicine. 2022. A history of behavioral economics and its applications: What we know and future research directions. https://nap ​.nationalacademies ​.org/resource ​/26874/BE_history_20221009.pdf .

See Chapters 2 and 4 for definition and discussion of nudges.

The charge also directed the committee to consider evidence from other countries; however, we were not able to do this systematically with the available time and resources.

See https://www ​.nationalacademies ​.org/event/07-18-2022 ​/workshop-on-behavioral-economics-exploring-applications-and-research-methods

A number of terms used in this report may be unfamiliar to some readers; they are defined when they first appear.

• Cite this Page National Academies of Sciences, Engineering, and Medicine; Division of Behavioral and Social Sciences and Education; Board on Behavioral, Cognitive, and Sensory Sciences; Committee on Future Directions for Applying Behavioral Economics to Policy; Beatty A, Moffitt R, Buttenheim A, editors. Behavioral Economics: Policy Impact and Future Directions. Washington (DC): National Academies Press (US); 2023 Apr 20. 1, Introduction.
• PDF version of this title (1.4M)

In this Page

Other titles in this collection.

• The National Academies Collection: Reports funded by National Institutes of Health

Related information

• PubMed Links to PubMed

Recent Activity

• Introduction - Behavioral Economics Introduction - Behavioral Economics

Your browsing activity is empty.

Activity recording is turned off.

Turn recording back on

Connect with NLM

National Library of Medicine 8600 Rockville Pike Bethesda, MD 20894

Web Policies FOIA HHS Vulnerability Disclosure

Help Accessibility Careers

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

The Rise of Behavioral Economics and Its Influence on Organizations

• Francesca Gino

Nobel winner Richard Thaler changed how we think about human behavior.

Richard Thaler, the University of Chicago professor who just won the Nobel Memorial Prize in Economic Sciences, inspired scholars across different disciplines and fundamentally changed the way we think about human behavior. He is considered the father of  behavioral economics  — a new field that combines insights from psychology, judgment and decision making, and economics to generate a more accurate understanding of human behavior. Among his many achievements, Thaler inspired the creation of behavioral science teams, often call “nudge units,” in public and private organizations around the globe. Together with Cass Sunstein, he wrote a book in 2008 called  Nudge: Improving Decisions about Health, Wealth, and Happiness , which suggests that there are many opportunities to “nudge” people’s behavior by making subtle changes to the context in which they make decisions. Nudges can solve all sorts of problems governments and businesses alike consider important.

Richard Thaler, the University of Chicago professor who just won the Nobel Memorial Prize in Economic Sciences, has inspired scholars across different disciplines and fundamentally changed the way we think about human behavior. He is considered the father of behavioral economics  — a relatively new field that combines insights from psychology, judgment, and decision making, and economics to generate a more accurate understanding of human behavior.

• Francesca Gino is a behavioral scientist and the Tandon Family Professor of Business Administration at Harvard Business School. She is the author of Rebel Talent and Sidetracked . francescagino

Partner Center

Articles on Behavioral economics

Displaying 1 - 20 of 53 articles.

New York City greenlights congestion pricing – here’s how this toll plan is expected to improve traffic, air quality and public transit

John Rennie Short , University of Maryland, Baltimore County

Biases against Black-sounding first names can lead to discrimination in hiring, especially when employers make decisions in a hurry − new research

Martin Abel , Bowdoin College

Just in time for back-to -school shopping: How retailers can alter customer behavior to encourage more sustainable returns

Christopher Faires , Iowa State University and Robert Overstreet , Iowa State University

Your political rivals aren’t as bad as you think – here’s how misunderstandings amplify hostility

Daniel F. Stone , Bowdoin College

Medicaid coverage is expiring for millions of Americans – but there’s a proven way to keep many of them insured

Mark Shepard , Harvard Kennedy School

Starbucks fans are steamed: The psychology behind why changes to a rewards program are stirring up anger, even though many will get grande benefits

H. Sami Karaca , Boston University and Jay L. Zagorsky , Boston University

Fundraisers who appeal to donors’ fond memories by evoking their emotions may get larger gifts – new research

Michael Kurtz , Lycoming College

Having COVID-19 or being close to others who get it may make you more charitable

Nancy R. Buchan , University of South Carolina ; Gianluca Grimalda , Kiel Institute for the World Economy , and Orgul Demet Ozturk , University of South Carolina

Microeconomics explains why people can never have enough of what they want and how that influences policies

Amitrajeet A. Batabyal , Rochester Institute of Technology

Declined invitations go over more graciously when lack of money is cited instead of lack of time – new research

Grant Donnelly , The Ohio State University and Ashley Whillans , Harvard University

Women are as likely as men to accept a gender pay gap if they benefit from it

Marlon Williams , University of Dayton

Free beer, doughnuts and a $1 million lottery – how vaccine incentives and other behavioral tools are helping the US reach herd immunity

Isabelle Brocas , USC Dornsife College of Letters, Arts and Sciences

Selfish or selfless? Human nature means you’re both

Keith Yoder , University of Chicago and Jean Decety , University of Chicago

Kids are probably more strategic about swapping Halloween candy and other stuff than you might think

Margaret Echelbarger , University of Chicago

The urge to punish is not only about revenge – unfairness can unleash it, too

Paul Deutchman , Boston College and Katherine McAuliffe , Boston College

Mandatory face masks might lull people into taking more coronavirus risks

Alex Horenstein , University of Miami and Konrad Grabiszewski , Prince Mohammad Bin Salman College (MBSC) of Business & Entrepreneurship

Why Americans are tiring of social distancing and hand-washing – 2 behavioral scientists explain

Gretchen Chapman , Carnegie Mellon University and George Loewenstein , Carnegie Mellon University

When safety measures lead to riskier behavior by more people

A company’s good deeds can make consumers think its products are safer

Valerie Good , Michigan State University

Paying all blood donors might not be worth it

Gretchen Chapman , Carnegie Mellon University

Related Topics

• Behavioral science
• Behavioural economics
• Behavioural science
• New research
• Nudge theory
• Philanthropy and nonprofits
• Quick reads
• Research Brief

Top contributors

Harvard University

Associate Professor of Markets, Public Policy and Law, Boston University

PhD Candidate in Management, Columbia University

Associate Professor of Economics, University of Miami

Assistant Professor of Marketing, Northeastern University

Professor of Psychology, Carnegie Mellon University

Associate Professor of Economics, Rady School of Management, University of California, San Diego

Associate Professor of Marketing, Washington University in St. Louis

Professor of Economics and Psychology, Carnegie Mellon University

Associate Professor of Economics, HEC Paris Business School

Marketing PhD Candidate, The Ohio State University

Assistant Professor of Marketing, Tilburg University

Berry Chair of New Technologies in Marketing and Professor of Marketing, The Ohio State University

Research Fellow, Harvard University

Senior lecturer, University of St Andrews

• X (Twitter)
• Unfollow topic Follow topic

Research Group Behavioral Economics

The research group behavioral economics comprises researchers at the Alfred-Weber-Institute who aim to integrate psychological insights into economics and finance.

From a descriptive perspective, we combine theoretical analyses with experimental and empirical methods to understand how individuals and groups make economic and financial decisions. From a prescriptive perspective, we study how to design institutions that help people making better decisions.  

The Behavioral Economics group publishes theoretical, experimental and empirical work that studies economic behavior in markets, strategic interactions, and individual decisions. Its work has been published in influential economics outlets including the  American Economic Review ,  Journal of Political Economy ,  Econometrica ,  Review of Economic Studies ,  Economic Journal  or  Journal of Economic Theory ,  as well as Finance and Management outlets such as the  Review of Financial Studies ,  Management Science  or  Operations Research .

Group members serve as editors for several journals in the field, including European Economic Review, Journal of Economic Behavior and Organization, Journal of Risk and Insurance, Management Science and Operations Research .

The Behavioral Economics group offers several lectures and seminars in the field of experimental and behavioral economics and finance in both the Bachelor and Master programs. It offers the Behavioral Economics Track in the Master Program. Its members supervise Master and Bachelor theses in the field of behavioral economics.

M.Sc. Economics Study Guide Behavioral Economics

Current Courses

Behavioral finance, topics in behavioral finance, programming for experimental economics, experimental and behavioral economics: methods and case studies, organizational behavior, topics in economic theory.

Dr. Theodoros Alysandratos

PD Dr. Alexandra Avdeenko

Dr. Moumita Deb

Prof. Dr. Sebastian Ebert

Dr. Pascal Kieren

Juniorprofessorship Macroeconomics

Katharina Momsen, Ph.D.

Prof. Jörg Oechssler, Ph.D.

Prof. Dr. Christiane Schwieren

Prof. Dr. Stefan Trautmann

Prof. Christoph Vanberg, Ph.D.

Development Economics

Macro & Financial Econometrics

Environmental Economics

• Patient satisfaction and experience

Getty Images/iStockphoto

What is the role of behavioral economics in healthcare?

Behavioral economics can enhance patient engagement and chronic disease management efforts by tapping into basic human tendencies..

• Sara Heath, Managing Editor

Why do some patients choose not to heed medical advice despite evidence that those guidelines will make them feel better? For healthcare providers looking to answer that question, it might be fruitful to explore the concept of behavioral economics.

The issue of patient engagement and treatment adherence is a tale as old as time. While healthcare providers rattle off treatment guidelines and medical advice, they often see patients experience poor outcomes because patients have not followed those recommendations.

Indeed, in some cases, medication adherence or strict devotion to a chronic care management plan isn't feasible for patients. Cost is a huge barrier to patient engagement , and a slate of social determinants of health (SDOH) can also get in the way of patient activation.

Still, healthcare providers adapting to value-based payment models that hinge on good outcomes need to drive healthy behavior change in patients. While conversations about cost and work to document and address SDOH are key steps in supporting healthy behavior change , healthcare providers might also consider the role behavioral economics can play in healthcare.

Defining behavioral economics

Behavioral economics is not necessarily a healthcare-specific term. According to an article published by the University of Chicago News, behavioral economics was termed by Nobel laureate and scholar Richard Thaler to explain the difference between what a person should do and what they actually do.

"Behavioral economics is grounded in empirical observations of human behavior, which have demonstrated that people do not always make what neoclassical economists consider the 'rational' or 'optimal' decision, even if they have the information and the tools available to do so," the article explains.

In the healthcare space, behavioral economics might explore questions like why people might delay exercise despite its health benefits or forego smoking cessation efforts.

"By asking questions like these and identifying answers through experiments, the field of behavioral economics considers people as human beings who are subject to emotion and impulsivity, and who are influenced by their environments and circumstances," the University of Chicago article states.

"This characterization draws a contrast to traditional economic models that have treated people as purely rational actors -- who have perfect self-control and never lose sight of their long-term goals -- or as people who occasionally make random errors that cancel out in the long run."

Behavioral economics is grounded in three foundational principles: overconfidence, loss aversion and self-control.

Someone might stop their course of antibiotics early because they feel better, despite knowing they need to take the full regimen (overconfidence). They might avoid a diet because they don't want to lose out on the foods they enjoy now for the health benefits they will gain down the line (loss aversion). They might delay a smoking cessation program for the short-term benefit of having a cigarette (self-control).

Behavioral economics terms that affect healthcare

Behavioral economics is a massive subsection of the overall study of economics. To that end, experts have developed language to refer to key concepts and findings, many of which might be helpful for healthcare providers considering behavioral economics in their own practice.

Availability heuristic

People often rely on easily recalled information, not actual data, when assessing outcomes. For example, individuals who recently heard about an adverse reaction to a vaccination might forego the shot despite ample evidence indicating that such adverse reactions are rare.

Bounded rationality

People do not have the cognitive ability, information or time to make the correct choice, potentially because they cannot synthesize new information quickly enough. This leads to making gut decisions that might not pay off in the long-term.

Bounded willpower

People will often choose an option that brings them the most pleasure in the short-term over options that have proven long-term benefits. For example, someone might delay a new diet until tomorrow in favor of continuing with their preferred diet at the moment.

Sunk cost fallacy

People will continue to invest in an ineffective or unfavorable activity because of the heavy investments they have already made. For example, an individual might think they have already spent much of their life as a smoker and that it is not worth quitting now.

Confirmation bias

People tend to look for, assess and remember information that confirms their own perceptions. For both patients and providers, this could lead to selective information-seeking and neglect of more valuable information.

Endowment effect

People tend to value something more simply because they own it. In healthcare, this could mean a patient values their current treatment plans over alternatives that could work better. This is related to the status quo bias , which states that individuals might favor current treatments they use over better alternatives.

Social norms

People's behaviors are often influenced by what they perceive as being normal or socially acceptable among their peers. This could lead some to adopt unhealthy behaviors, but social norms can also be used as a tool to influence healthy behavior change.

Nudging is a tool that lets stakeholders use indirect suggestions to reinforce positive behaviors. Appointment reminder text messages can serve as nudges to get patients in for their appointments and wellness checks regularly.

Default bias

People tend to opt for pre-set options. In a healthcare setting, a prechecked box consenting to vaccine receipt could influence an individual to get the preventive service.

Framing effect

People interpret the same information differently depending on how it has been presented. The framing effect is an important concept for practicing motivational interviewing. A patient might absorb the implications of a new exercise plan if it is put in terms that are important to them -- the ability to play with one's grandchildren versus greater life expectancy, for example.

While many of these concepts can lead patients to adopt or maintain unhealthy behaviors, they can also be used as tools to influence healthy behavior change.

Indeed, understanding these concepts has allowed people across a number of industries to adapt their relationships with consumers. For example, displaying fruits, vegetables and other nutritious foods at eye level is a nudge toward healthy food purchasing decisions on the part of grocers.

Although healthcare providers are not necessarily selling health to their patients, they can also adopt behavioral economics principles to tailor their patient engagement efforts.

Behavioral economics strategies for healthcare

Healthcare providers and researchers alike have started to adopt behavioral economics to better understand how they can improve overall outcomes and patient well-being. Specific areas that benefit from behavioral economic principles include, but are not limited to, the following:

• Healthy eating.
• Adoption of digital health.
• Medication adherence.
• Physical activity.
• End-of-life decisions.
• Substance use disorder.
• Clinician behavior.

Research has allowed healthcare stakeholders to create patient and clinician engagement strategies, ranging from use of nudges to motivational interviewing.

Use of nudges

Nudges have proven effective in prompting positive behavior change for both patients and providers.

"Nudges are interventions, big and small, aimed at getting people to act in their own best interest," according to an article by consulting firm McKinsey.

The above example of displaying nutritious foods at eye level constitutes a nudge in behavioral economics. It allows for freedom of choice -- the consumer can choose not to purchase the nutritious food -- but it makes it easier to make the healthy choice.

Nudges can be used to drive positive behavior change in both patients and providers. In a 2022 JAMA Cardiology article , researchers detailed a patient- and clinician-facing nudge to initiate statin prescribing. Adding nudges for clinicians within the EHR increased prescribing; prescribing increased further when clinician nudges were paired with nudges to patients via text message.

Nudges can integrate other behavioral economics concepts. For example, researchers at Mount Sinai published a paper in BMC Primary Care about how new signage utilized principles of social norms, saliency, and pledging reduced appointment no-show rates .

The researchers hung signs throughout a primary care practice (saliency) that prompted patients to continue showing up to scheduled appointments. Signs featured statements such as: "We strive to meet your goals… Help us meet ours. All you need to do is show up." The signs also stated that nine in 10 patients attend their scheduled appointments (social norms).

The primary care clinic also issued appointment scheduling cards and asked patients to sign them (pledging).

Combined, these principles proved effective. The visit adherence rate improved from 74.7% to 76.5%, while the visit constancy rate improved from 59.5% to 74.3%.

Motivational interviewing

Motivational interviewing (MI) is a counseling technique used to approach behavior change in the context of an individual's personal goals and needs. In healthcare, a provider might use motivational interviewing to help a patient begin a weight loss plan or more ardently stick to a chronic care management regimen.

When practicing motivational interviewing, the clinician might help the patient identify personal, sometimes long-term, goals that are stymied by unhealthy behaviors. A patient with overweight or obesity might not be motivated to complete a weight loss program because of the clinical benefits, but they might be motivated by the chance to spend more time playing outside with their children.

Healthcare providers should be cognizant of key behavioral economics when practicing motivational interviewing . For example, when practicing motivational interviewing with a patient with substance use disorder (SUD), understanding bounded willpower -- the concept that people will choose short-term gain over long-term benefit -- will help frame motivation efforts, according to a paper on the topic in Experimental and Clinical Psychopharmacology.

Behavioral economics plays a role in healthy behavior changes that require incremental and repeated action. In the SUD treatment example, a patient might struggle to adhere to peer counseling meetings because the individual meeting might not feel impactful and it is difficult to conceptualize the long-term impact of repeated attendance.

Knowledge of these behavioral economics can help tailor motivational interviewing.

"MI has identified four processes by which health providers can engage individuals and create an environment for the exploration of behavior change: engaging, focusing, evoking, and planning," the researchers wrote in the paper. "One of the most effective ways to evoke change language is to evoke personal values and goals that are inconsistent with current behavior."

Through motivational interviewing, healthcare providers can help patients reframe their current behaviors using the lens of behavioral economics -- for example, flagging time spent consuming alcohol versus time spent with family or pursuing one's career. Clinicians can also use motivational interviewing to point out the unexpected costs of some unhealthy behaviors to leverage sunk cost fallacy or bounded willpower to promote behavior change.

Near-term rewards and incentives

Incentive programs have been the cornerstone of many patient engagement programs, especially ones run by healthcare payers and employers. These patient engagement strategies get to the heart of the loss aversion concept in behavioral economics.

As noted above, an individual might delay a new exercise program because exercise is hard despite the long-term benefit of better health. An incentive program offering upfront free gym memberships could provide enough of a near-term gain to counteract that loss aversion, according to researchers at The Commonwealth Fund.

Healthcare stakeholders might tie incentives to other preferred behaviors, like receipt of preventive care or vaccinations, to compel patient behavior change.

However, more research is necessary to evaluate the long-term impact and feasibility of incentives. While data has shown that offering incentives for healthy food purchases or weight loss can drive short-term gains, the data is scant on whether incentives can support long-term improvement.

Default options

Healthcare providers can use default bias to influence patients into healthy behavior change. In many cases, this looks like using an opt-out checkbox or a prechecked option for a certain health behavior.

For example, a clinic might precheck an option to receive this season's flu shot during a regular physical. With the understanding of default bias, the clinic might sway the patient to receive the vaccine because that option has already been selected.

Opt-out patient engagement programs have proven effective. In a 2023 study in JAMA Internal Medicine , researchers found that an opt-out smoking cessation program improved patient engagement. When patients were preenrolled in a smoking cessation program -- meaning they'd have to actively unenroll -- they had higher participation rates than those who had to elect to enroll (78% versus 73%).

That study illustrates the default bias, stating that patients are more likely to adopt a healthy behavior when they are already enrolled or preselected to complete that healthy behavior.

At its core, patient engagement is an exercise in human behavior. By understanding behavioral economics, healthcare providers might enhance their patient activation strategies and ideally compel healthy behavior change.

Sara Heath has been covering news related to patient engagement and health equity since 2015.

Dig Deeper on Patient satisfaction and experience

Patient Engagement Strategies for Improving Patient Activation

Effective Patient Engagement Tips to Prevent Hospital Readmission

SDOH, Structural Barriers Quell Maternity Outcomes for Home-Based Care

Top Patient Engagement Technologies for Population Health Management

While many behavioral health providers are looking to EHR vendor tools for integrated care, interviewed customers reported ...

Providence is using FHIR standards to streamline payer-provider data exchange, enhancing quality reporting and reimbursement ...

Health First, Axis Health and Atlantis Orthopedics recently announced EHR implementation projects to improve patient care and ...

• Yale University
• About Yale Insights
• Privacy Policy
• Accessibility

What We Get Wrong about the Effects of Population Growth

New research co-authored by Professor Jason Dana finds that people over-focus on increased consumption without considering the positive effects of increased production.

• Jason Dana Associate Professor of Management and Marketing

When Yale SOM’s Jason Dana asks people to think about a consumer good that has gotten more affordable over time—say, televisions—they are confident they understand why: the underlying technology has improved and production is more efficient, so the product has come down in cost.

But when he asks them whether in general real costs—defined as the amount of work required to purchase individual items—have gone up or down over time, they almost always respond incorrectly, maintaining with just as much confidence that costs are on the rise. (Nominal prices, tied to inflation, are distinct from real costs and do generally rise over time.)

In new research, Dana, his former Yale SOM colleague George E. Newman, now of the University of Toronto; and Yale SOM PhD graduate Guy Voichek, a faculty member at Imperial College London, offer a label for this kind of thinking: “efficiency neglect.” Through several experiments, they show that, when thinking about population growth, people focus on increased demand, failing to consider the increased productivity that typically comes along with it. These beliefs are relatively benign at the individual level—our personal finance decisions don’t usually affect people outside our home or family —but can have downstream effects on society at large. For instance, Dana points out, people who don’t consider the benefits of population growth may support politicians who favor protectionist trade policies or limits on immigration.

“You can live your own individual life pretty well without understanding economics,” Dana explains. “But that lack of understanding probably does lead us to favor sometimes harmful or wasteful economic policies because the stuff that’s intuitive to us is not necessarily correct.”

The paper follows a bigger-picture analysis of lay economic reasoning that Dana and another coauthor published in January . In that research, Dana argues that non-economists’ understanding of markets and economic activity is understudied to the detriment of the consumer psychology field.

“Economists don’t tend to care very much, and psychologists tend not to know a lot about economics,” he says. “My work has always been kind of at the nexus of those two things.”

The belief that resources cannot keep up with demand—called depletionism—is not new. The authors point out that Plato predicted that a city-state might need to kick people out if its population grew past 5,040 households; in 1980, the biologist Paul Ehrlich famously lost a bet with the economist Julian Simon that the cost of several natural resources—including copper—would increase over the next decade.

“Because copper was used in plumbing, and all these people from developing countries were building houses, he thought, ‘Where is all this copper going to come from?’” Dana says. “But we can laugh at that now. We simply came up with a substitute.”

For the new paper, the researchers examined Americans’ views on costs over time and on how population growth would affect goods in a hypothetical thriving nation, and whether prompting people to think about production efficiencies mitigated their depletionist views, among other questions.

They found that prompting people to think about efficiency gains did counter depletionist thinking but not for everyone. When told to consider that more people can lead to more workers, more innovative ideas, and more incentives to improve technology, 27% of respondents thought goods in the hypothetical nation would be more abundant in the future, up from 6% without the prompt. The jump is significant, but future abundance is still a minority belief.

“If it were easy to shed these ideas, they would have been shed already,” Dana says.

Dana, who is currently studying people’s understanding of inflation, says he hopes the research will prompt further inquiries into lay economic beliefs, especially among marketing and consumer research scholars. As a Yale Center for Customer Insights blog post about his January paper points out, such research is “essential to understanding consumer psychology—why people act the way they do in market exchanges.” But it also may be essential to a more productive world, helping policymakers understand how to influence people’s understanding of bigger economic questions involving trade and immigration.

Dana finds the work fascinating.

“I really like talking about lay economics,” he says. “I know how economists think, and I am also acutely aware that people don’t think like economists.”

• Media Center

Cognitive Biases

A list of the most relevant biases in behavioral economics

Action Bias

Why do we prefer doing something to doing nothing?

Affect Heuristic

Why do we rely on our current emotions when making quick decisions?

Ambiguity Effect

Why do we prefer options we know?

Anchoring Bias

Why do we compare everything to the first piece of information we received?

Attentional Bias

Why do we focus more on some things than others?

Authority Bias

Why do we always trust the doctor, even though they might be wrong?

Availability Heuristic

Why do we tend to think that things that happened recently are more likely to happen again?

Bandwagon Effect

Why do we support opinions as they become more popular?

Barnum Effect

Why do we believe our horoscopes?

Base Rate Fallacy

Why do we rely on specific information over statistics?

Belief Perseverance (The Backfire Effect)

Why do we maintain the same beliefs, even when we are proved wrong?

Benjamin Franklin effect

Why do we like someone more after doing them a favor?

Bikeshedding

Why do we focus on trivial things?

Bottom-Dollar Effect

Why do we transfer negative emotions about being broke on items that we purchase?

Bounded Rationality

Why are we satisfied by “good enough?”

Bundling Bias

Why do we value items purchased in a bundle less than those purchased individually?

Bye-Now Effect

Why are we likely to spend more after reading the word “bye”?

Cashless Effect

Why does paying without physical cash increase the likelihood that we purchase something?

Category Size Bias

Why do we think we’re more likely to win at the big casino versus the small one?

Choice Overload

Why do we have a harder time choosing when we have more options?

Cognitive Dissonance

Why is it so hard to change someone's beliefs?

Commitment Bias

Why do people support their past ideas, even when presented with evidence that they're wrong?

Confirmation Bias

Why do we favor our existing beliefs?

Decision Fatigue

Why do we make worse decisions at the end of the day?

Why do we think the past is better than the future?

Decoy Effect

Why do we feel more strongly about one option after a third one is added?

Disposition Effect

Why do we tend to hold on to losing investments?

Distinction Bias

Why do we view options as more distinct when evaluating them simultaneously?

Dunning–Kruger Effect

Why can we not perceive our own abilities?

Einstellung Effect

Why do our past experiences prevent us from reaching the best possible outcome?

Empathy Gap

Why do we mispredict how much our emotions influence our behavior?

Endowment Effect

Why do we value items more if they belong to us?

Extrinsic Incentive Bias

Why do we think others are in it for the money, but we’re in it for the experience?

False Consensus Effect

Why do we overestimate agreement?

Framing Effect

Why do our decisions depend on how options are presented to us?

Functional Fixedness

Why do we have trouble thinking outside the box?

Fundamental Attribution Error

Why do we underestimate the influence of the situation on people’s behavior?

Gambler's Fallacy

Why do we think a random event is more or less likely to occur if it happened several times in the past?

Google Effect

Why do we forget information that we just looked up?

Halo Effect

Why do positive impressions produced in one area positively influence our opinions in another area?

Hard-easy effect

Why is our confidence disproportionate to the difficulty of a task?

Why do we take mental shortcuts?

Hindsight Bias

Why do unpredictable events only seem predictable after they occur?

Hot Hand Fallacy

Why do we expect previous success to lead to future success?

Hyperbolic Discounting

Why do we value immediate rewards more than long-term rewards?

IKEA Effect

Why do we place disproportionately high value on things we helped to create?

Identifiable Victim Effect

Why are we more likely to offer help to a specific individual than a vague group?

Illusion of Control

Why do we think we have more control over the world than we do?

Illusion of Transparency

Why do we feel that others can read our mind?

Illusion of Validity

Why are we overconfident in our predictions?

Illusory Correlation

Why do we think some things are related when they aren’t?

Illusory Truth Effect

Why do we believe misinformation more easily when it’s repeated many times?

Impact Bias

Why do we overestimate our emotional reactions to future events?

In-group Bias

Why do we treat our in-group better than we do our out-group?

Incentivization

Why do we work harder when we are promised a reward?

Just-World Hypothesis

Why do we believe that we get what we deserve?

Why does spacing out the repetition of information make one more likely to remember it?

Law of the Instrument

Why do we use the same skills everywhere?

Less-is-Better Effect

Why do our preferences change depending on whether we judge our options together or separately?

Leveling and Sharpening

Why do we exaggerate some details of a story, but minimize others?

Levels of Processing

Why do we remember information that we attach significance to better than information we repeat?

Look-elsewhere Effect

Why do scientists keep looking for a statistically significant result after failing to find one initially?

Loss Aversion

Why do we buy insurance?

Mental Accounting

Why do we think less about some purchases than others?

Mere Exposure Effect

Why do we prefer things that we are familiar with?

Messenger Effect

Why do we find some people more credible than others?

Motivating Uncertainty Effect

Why are we more motivated by rewards of unknown sizes?

Naive Allocation

Why do we prefer to spread limited resources across our options?

Naive Realism

Why do we believe we have an objective understanding of the world?

Negativity Bias

Why is the news always so depressing?

Noble Edge Effect

Why do we tend to favor brands that show care for societal issues?

Normalcy Bias

Why do we believe that nothing bad is going to happen?

Nostalgia Effect

How do our sentimental feelings for the past influence our actions in the present?

Observer Expectancy Effect

Why do we change our behavior when we’re being watched?

Omission Bias

Why don’t we pull the trolley lever?

Optimism Bias

Why do we overestimate the probability of success?

Ostrich Effect

Why do we prefer to ignore negative information?

Overjustification Effect

Why do we lose interest in an activity after we are rewarded for it?

Peak-end Rule

How do our memories differ from our experiences?

Pessimism bias

Why do we think we’re destined to fail?

Planning Fallacy

Why do we underestimate how long it will take to complete a task?

Pluralistic Ignorance

Why do we think our beliefs are different from the majority?

Primacy Effect

Why do we only remember the first things on our grocery list?

Why do some ideas prompt other ideas later on without our conscious awareness?

Projection Bias

Why do we think our current preferences will remain the same in the future?

Reactive devaluation

Why is negotiation so difficult?

Recency Effect

Why do we better remember items at the end of a list?

Regret Aversion

Why do we anticipate regret before we make a decision?

Representativeness Heuristic

Why do we use similarity to gauge statistical probability?

Response Bias

Why do we give false survey responses?

Restraint Bias

Why do we overestimate our self-control?

Rosy Retrospection

Why do we think the good old days were so good?

Salience Bias

Why do we focus on items or information that are more prominent and ignore those that are not?

Self-serving Bias

Why do we blame external factors for our own mistakes?

Serial Position Effect

Why do we better remember items at the beginning or end of a list?

Sexual Overperception Bias

Why do men think that women are always flirting with them?

Social Norms

Why do we follow the behavior of others?

Source Confusion

Why do we forget where our memories come from?

Spacing Effect

Why do we retain information better when we learn it over a long time period?

Spotlight Effect

Why do we feel like we stand out more than we really do?

Status Quo Bias

Why do we tend to leave things as they are?

Suggestibility

Why is yawning contagious?

Survivorship Bias

Why do we misjudge groups by only looking at specific group members?

Take-the-best Heuristic

Why do we focus on one characteristic to compare when choosing between alternatives?

Telescoping Effect

Why do some things “seem like they just happened yesterday?”

The Illusion of Explanatory Depth

Why do we think we understand the world more than we actually do?

The Pygmalion effect

Why do we perform better when someone has high expectations of us?

The Sunk Cost Fallacy

Why are we likely to continue with an investment even if it would be rational to give it up?

Zero Risk Bias

Why do we seek certainty in risky situations?

Eager to learn about how behavioral science can help your organization?

Get new behavioral science insights in your inbox every month..

The A to Z of economics

Economic terms, from “absolute advantage” to “zero-sum game”, explained to you in plain english.

Digital Engagement Strategy and Health Care Worker Mental Health: A Randomized Clinical Trial

JAMA Network

Anish K Agarwal, Lauren Southwick, Rachel E Gonzales, Lisa M Bellini, David A Asch, Judy A Shea, Nandita Mitra, Lin Yang, Michael Josephs, Michael Kopinksy, Rachel Kishton, Mohan Balachandran, Courtney Benjamin Wolk, Emily M Becker-Haimes, Raina M Merchant

CHIBE Experts

• Anish K. Agarwal MD, MPH, MS
• David A. Asch, MD, MBA
• Michael Kopinsky, BSE
• Mohan Balachandran, MA, MS
• Michael Josephs
• Raina Merchant, MD, MSHP, FAHA

Research Areas

• Digital Health & Technology

You might also be interested in...

Validation of a smartphone telematics algorithm for classifying driver trips

Behavioral interventions to improve breast cancer screening outreach: two randomized clinical trials, automated text message-based program and use of acute health care resources after hospital discharge: a randomized clinical trial, computer-facilitated screening and brief intervention for alcohol use risk in adolescent patients of pediatric primary care offices: protocol for a cluster randomized controlled trial, the impact of health care algorithms on racial and ethnic disparities : a systematic review, access to telehealth and changes in diabetes care patterns during the pandemic: evidence from a large integrated health system in the southeast usa, artificial intelligence and technology collaboratories: empowering innovation in ai + agetech, investigating the feasibility of using a wearable device to measure physiologic health data in emergency nurses and residents: observational cohort study, evaluation of four interventions using behavioural economics insights to increase demand for voluntary medical male circumcision in south africa through the moyaapp: a quasi-experimental study, pilot study of a mobile phone chatbot for medication adherence and toxicity management among patients with gi cancers on capecitabine, clinician perspectives on virtual specialty palliative care for patients with advanced illnesses, algorithmic identification of persons with dementia for research recruitment: ethical considerations, sign up for our healthy nudge newsletter.