Behavioural theory economics

Behavioural theory economics

Behavioural theory economics, more commonly known as behavioural economics, is a field that uses insights from psychology and economics to understand how individuals actually behave in economic situations, as opposed to how they’re predicted to behave under traditional economic theories. Behavioural economics comes under the behavioural science category, which is growing in popularity year-on-year in the market research industry.

Key concepts of behavioural theory economics:

• Cognitive Biases – systematic patterns of deviation from norm or rationality in judgement, which can affect decisions and economic outcomes.
• Prospect Theory – describes how people choose between probabilistic alternatives and evaluate potential gains and losses, highlighting that losses often have a more significant impact than equivalent gains.
• Nudges – small interventions that steer people toward better decisions without restricting their freedom of choice.

Behavioural economics is key for market research and researchers because it provides a greater understanding of consumer behaviour, beyond what traditional economic models predict. It helps market researchers to identify and understand consumer biases, design effective surveys and experiments, segment markets more accurately and improve marketing strategies. By incorporating behavioural theory economics into market research, companies can gain a more holistic view of their target audience, leading to more effective product development and customer engagement practices.

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