An approach to economic analysis that incorporates hological insights into human behaviour to explain economic decisions. Behavioural economics is motivated by the observation of anomalies that cannot be explained by standard models of choice. It provides an explanation for the anomalies by introducing human and social cognitive and emotional biases into the decision-making process. In most applications choice behaviour is still modelled as the maximization of utility subject to constraints; the difference between traditional economics and behavioural economics being in the form of the utility function. See also Prospect theory.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|