JEL Classifications: A12, C92, D1
THEORETICAL BASICS AND PRACTICAL ASPECTS OF BEHAVIORAL ECONOMICS Author: Marine Natsvaladze
| Published: 2019-12-27
| Pages: 68 - 73
For Citation: Natsvaladze, M. (2019). Theoretical Foundations and Practical Aspects of Behavioral Economics. Globalization And Business, #8, pp. 68-73.
Traditional Economics looks at the persons as at some kind of rational machine which takes into consideration all available information and then makes optimal decision. Re- ality is rather different. The behavioral economics claims that there is no rational «economic human” and probably will nev- er exist. Person’s behavior is irrational and this irrationality is not random and clueless. Vice-versa - this irrationality is systemic and predictable.
Behavioral economics explores what affects people›s economic decisions and the consequences of those decisions for market prices, returns, and resource allocation. Tradition- al economic research assumes that people›s economic deci- sions are based on the rule of maximizing utility.
Behavioral economics uses experiments that observe human behavior in order to uncover how we think. Behavior- al economics has been called the science of decision-making. It is a growing academic discipline which uses experiments that observe human behavior in order to uncover how we think. Behavioral economics is about understanding com- mon decision mistakes that people make and why they make them. In particular, a large aspect of behavioral economics is concerned with the gap between intention and action.
Classical economic theory assumes that individuals are rational. However, in the real world, we often see irrational behavior – decisions which don›t maximize utility but can cause a loss of economic welfare. It means economists need to take into account the potential for irrationality.
Successful marketers must have a profound understand- ing of the consumer’s thought process in order to create a suc- cessful marketing campaign. By understanding the consumer’s decision-making process, marketers are able to develop value propositions that really fit the consumer’s needs. The impor- tance of understanding behavioral economics for marketers is immeasurable as it allows for a better understanding of the human mind. Behavioral economics allows marketing profes- sionals to optimize marketing strategies and get real results.
In the article are reviewed applied aspects of behavioral economics, also theoretical and practical results of researches. These results will be useful in company management, for pol- iticians, in private decision making as they give different per- spective to rational-functional models. In case of ignoring the interdisciplinary approaches, integration of economics and psy- chology can result in waste of resources and wrong decisions.
BEHAVIORAL ECONOMICS, ECONOMIC DECISION MAKING, ECONOMICS AND PSYCHOLOGY, ECONOMIC POLICY
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