Have you ever considered why we purchase limited edition items or take advantage of “50% off” offers even when they aren’t essential? Consumer choices may seem personal, but businesses can use psychological principles to influence them. Behavioural economics is a fascinating field that uses psychology, economics, and decision-making research to explain human buying behaviour. This …
Loss aversion is one of the most powerful theories in behavioral economics and significantly influences individuals’ investment decisions. Loss aversion essentially refers to the tendency for people to avoid losses at the expense of gains. In other words, losing money hurts more than winning it feels good. This strong psychological bias drives much of financial …
Money management is an integral part of every aspect of our existence. Yet many people struggle with managing their finances, wondering why they don’t have enough money or why saving is so hard. Mental accounting, a psychological phenomenon, is a little-known reason for this. Mental accounting, a concept from behavioral economics, explains how people categorize …
Finance is a discipline that deals with the management, investment, and allocation of funds by people. For many years, traditional ideas have dominated the understanding of financial markets and individual behavior. The discipline operates under the assumption that individuals make decisions to maximize their financial return, exhibit logical behavior, and have access to all pertinent …
Saving and investing are key elements of financial well-being; however, many people struggle to do this both regularly and effectively. Conventional financial advice assumes that people always make rational decisions based on their self-interest, even though the real world works differently. The reality is that people often neglect saving, delay investing, and make hasty financial …
Today, businesses are more than just providers of goods or services; they are experts in human behavior, able to subtly guide customers toward decisions that benefit the company’s profitability. Behavior nudges, a concept derived from behavioral economics, are a way to influence consumer behavior without restricting consumer choice. Nudges—soft nudges designed to motivate consumers to …
Everyday life, from the smallest purchases to long-term investments and savings, is somewhat centered around financial decisions. Yet, despite the critical importance of smart financial management, many people still make decisions that are clearly not in their own best financial interests. These illogical choices can lead to overspending, higher debt, insufficient savings, and lost investment …
In behavioral economics and psychology, nudge theory is a theory that explains how small environmental cues influence individual behavior. Unlike direct instructions or commands, a nudge is a gentle cue or design element that is intended to motivate an individual to take a specific action without being forced. The idea is to help people make …
Consumer behavior has always been of interest to economists, marketers, and businesses around the world. Behavioral economics paints a more realistic picture, while traditional economics assumes that people behave logically and make decisions based on reason. Behavioral economics recognizes that consumers often make seemingly illogical decisions, which are actually the result of a combination of …
Behavioral economics in particular provides a prism through which we can view our personal economy, particularly our spending patterns. Behavioral economics recognizes that people are often illogical and driven by psychological factors, biases, and emotions, which differs from traditional economic theory, which assumes that individuals make reasonable judgments based on logic and evidence. These thinking …