Behavioural Economics

Behavioral economics is one of the fastest growing fields in economics. It is motivated by findings from psychology (and sociology) and uses experimental, field, and neuroeconomic evidence. Behavioral research over the past four decades has shown that two central assumptions in mainstream economics, namely, full rationality and purely selfish preferences are far less universal than was originally believed. In this essay, we bring out the role of alternative behavioral decision theories, emotions, framing effects, mental accounting, behavioral models of time discounting, new solution concepts in behavioral game theory, neuroeconomics, and the debate on liberalism and paternalism, among others.