What is so hot about Behavioral Economics?

Taken from google. Whoever made this, you are awesome.

Homo economicus and the assumptions

The field of Economics has evolved in a lot of ways since the times of Adam Smith. At its heart though, Economics tries to answer this one question:

  • Completeness
  • Transitivity
  • Monotonicity
  • Continuity
  • Reduction
  • Substitution

The game changer: Prospect Theory

Lucky for us, the field of Psychology has conducted a lot of experiments on human behavior and found out that a normal human being (unless you are Spock) is susceptible to at least one of the following:

  • Framing Effect
  • Endowment Effect
  • Loss Aversion
  • Poor estimator of probabilities



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