Behavioral Economics Rules
Behavioral Economics 10 rules
Here are ten rules of behavioral economics that can help you better understand how people make decisions:
- • People are predictably irrational: People don't always make decisions based on pure logic and reason. Instead, their decision-making is often influenced by biases, emotions, and other psychological factors.
- • People are loss averse: People tend to feel the pain of loss more than they enjoy the pleasure of gain, which can lead to risk-averse behavior.
- • People are influenced by Anchoring: People's initial starting point or reference point can influence their decision-making, even if the reference point is arbitrary or unrelated to the decision at hand.
- • People are influenced by framing: The way information is presented can influence people's decisions, even if the information itself is the same.
- • People are influenced by scarcity: The perception of scarcity can increase the value or desirability of something, even if the actual availability of the thing is unchanged.
- • People are influenced by choice overload: Too many options can lead to indecision or poor decision-making.
- • People are influenced by social norms: People often look to others for cues on how to behave, and will conform to social norms to fit in.
- • People are influenced by their past experiences: People's past experiences can influence their decision-making, even if the past experience is not directly relevant to the current situation.
- • People are influenced by their mental and emotional states: People's emotional and mental states can influence their decision-making, and can be affected by factors such as stress, fatigue, and hunger.
- • People are influenced by nudges: Small, subtle cues can influence people's behavior, and can be used to encourage people to make certain decisions.