Behavioral economics
Studies how we really decide, combining economics and psychology, instead of assuming perfectly rational people.
What it studies
Why we sometimes choose against our own interests, which mental shortcuts we use and how the way options are presented matters. For design, it provides evidence on how people read, compare and choose within a product or service.
Principles
Bounded rationality
We decide without being able to know or compare all the options.
Context matters
The same option is chosen differently depending on how, and next to what, it is presented.
Everything is relative
We value gains and losses relative to what we already have or expect.
Applications in design
Use it like this
Design each decision based on how people behave, not on how they should behave.
Avoid
Using biases to get people to do what they wouldn’t do on reflection.
Don’t fall for it
Test with real people, because many effects change with context.
Theories and concepts
Foundational theories
The ideas the field is built on
Bounded rationality
We decide with limited information, time, and attention: we settle for something good enough.
Nudge and choice architecture
Changing how options are presented changes what we choose, without banning anything.
Attention and memory
What we see and what we remember
Choosing among options
How the way options are presented shapes our choice
Price and money
How we perceive money
Mental accounting
We treat money differently depending on where it comes from or what we set it aside for.
Time and willpower
How we value now versus later
The self and losses
How we see ourselves and what is ours
Social influence
How other people influence us
Other
Principles of influence
Six shortcuts that make us say yes without much thought, from reciprocity to scarcity.
Methods and tools
- MethodDot votingEach person spreads a few dots among the ideas, and the most voted ones move forward.
- ApproachEAST frameworkTo change a behavior, make it easy, attractive, social and timely.
- MethodJourney mapA map of a person's path through a service, with what they do, use and feel at each step.
Connections
Campos cercanos
Authors and works
- 1955
Herbert A. Simon
Proposed a model of decision-making with limited information and computing capacity, the basis of bounded rationality.
- 1979
Daniel Kahneman and Amos Tversky
Studied the heuristics and biases of judgment and proposed prospect theory.
- 2008
Richard Thaler and Cass Sunstein
Thaler brought these ideas into economics and, with Sunstein, proposed the nudge.
Sources
Original sources
- Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99–118. View source: Simon, H. A. (1955)
- Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. View source: Kahneman, D., & Tversky, A. (1979)
- Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press.
Secondary sources
- Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
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