Definition
- Behavioural economics
- Behavioural economics is the study of decision-making that brings the insights of psychology into economics.
- Not to be confused with: Rationality
- Rationality means that people take all the available information and make consistent, informed decisions that are in their own best interest.
Test yourself
What is the difference between behavioural economics and rationality?
Rationality is the assumption the model makes; behavioural economics is the field that tests it against how people really choose.