Behavioral Economics focuses on the psychological, social, cultural, and emotional factors that influence decision making. It is commonly applied in the areas of marketing, user interface design, finance, politics, and public policy.
In fact, companies around the world have teams of behavioral scientists helping them decode human behavior that is often impulsive, short-sighted and irrational, to better influence our decision as consumers or ‘nudge’ us in selecting one product or brand over another.
On this Conversational Masterclass, Behavioral Economics Practitioner, Rohit Kaul, decode factors that influence our decisions as consumers. Also explained are key concepts like Bounded Rationality, Nudge Theory, Heuristics & Biases, and more. All of this illustrated through fun thought experiments and real-world applications by brands such as McDonald’s, Netflix, Uber, and others.
Rohit Kaul is General Manager Marketing at HCL Corporation and the Shiv Nadar Foundation. Catch his musings on Behavioral Sciences, Mental Models, Productivity, and more at seekingnorth.in
Pilot - Krishnan Hariharan [ 01:34 ]
Introduction to the Podcast
Introduction to Behavioral Economics - Ajay Menon [ 30:04 ]
Introduction to Behavioral Economics
Understand the fundamentals of Behavioral Economics, get a brief historical view of Microeconomics, Classical and Neoclassical Economics. Delve into the importance of Behavioral Economics.
Key Actors and Key Concepts Part I - Ajay Menon [ 33:16 ]
Key Actors and Key Concepts Part I
ntegral to understanding Behavioral Economics are the following key concepts:
Bounded Rationality (Herbert Simon) - According to this view, our decisions are not always optimal. Primarily due to restrictions on how much information we can process, limited by either our knowledge or information.
Heuristics & Biases (Kahneman and Tversky) - Daniel Kahneman and Amos Tversky’s ideas on ‘heuristics and biases’ entered the mainstream decades after they first proposed it. It is the understanding of economic decisions based on measuring actual choices made under different conditions.
Prospect Theory (Kahneman and Tversky) - This shows our willingness to take risks is influenced by the way in which choices are framed, it is ‘context-dependent’. Kahneman was awarded the Nobel Memorial Prize in 2002 for his work on ‘Prospect Theory’.
Key Actors and Key Concepts Part II - Ajay Menon [ 35:13 ]
Key Actors and Key Concepts Part II
Key concepts discussed on this episode are:
System 1 and 2 (Kahneman and Tversky) - The central thesis is a dichotomy between two modes of thought: "System 1" is fast, instinctive and emotional; "System 2" is slower, more deliberative, and more logical. Daniel Kahneman’s book “Thinking Fast and Slow” is based on this premise.
Nudge Theory (Richard Thaler) - The concept implies how a subtle shift in policy shift encourages people to make decisions that are in their broad self-interest. It’s not about penalising people financially if they don’t act in a certain way. It’s about making it easier for them to make a certain decision.
Heuristics and Biases Part I - Ajay Menon [ 27:30 ]
Heuristics and Biases Part I
Let’s explore ‘Heuristics & Biases’. In the process of decision making, we are influenced by factors that sometimes far outweigh logic. These factors are heuristics. Cognitive biases increase our mental efficiency by enabling quick decisions negating the need to deliberate, however they can also lead to poor decision-making and false judgments. We cover ‘Anchoring’ and ‘Defaults’ in this episode.
Heuristics and Biases Part II - Ajay Menon [ 25:00 ]
Heuristics and Biases Part II
We continue to explore ‘Heuristics & Biases’ and their role in Behavioral Economics. In this final episode we discuss ‘Social Proof’, ‘Incentives’, and one of the strongest biases of all, ‘Loss Aversion’.