Behavioral Economics

The science of solving complex problems

Inside behavioral economics


Unlike traditional economics—which assumes people make decisions logically and rationally—behavioral economics merges human behavior and economics to show how people really make decisions and why they behave the way they do. In essence, it’s about designing solutions that align with how people actually behave.

Most complex business problems boil down to human behavior. Ultimately, how people behave strongly influences how products, services and organizational processes are designed and how stakeholders embrace them.

As emerging threats and opportunities rapidly change the business landscape, organizations that truly understand what drives customers and employees to think or act the way they do will prevail.

Behavioral economics is at the center of this. It shows we don’t always make decisions in a rational and calculated way. We often use thought processes that are intuitive and gut-driven rather than deliberative and planned, leading us to:

  • misjudge important facts
  • be inconsistent in our perception of events and judgment of alternatives
  • miscalculate probabilities or the likelihood of an event occurring
  • be influenced by decisions of those around us
  • be sensitive to the way choices are framed and presented
  • prefer smaller but immediate rewards over larger delayed ones
  • attribute value in relative (rather than objective) terms

You can’t force people to be more rational, but by recognizing and anticipating cognitive biases using behavioral science and data analytics, you can design targeted, cost-effective interventions that nudge people toward better decisions and behaviors. It’s about addressing the inefficiencies that stand between you and the best outcomes for your organization and stakeholders.


Gallup research shows that companies applying behavioral economics principles outperformed peers by 85% in sales growth and more than 25% in gross margin during a one-year period.

Unlock value through behavioral interventions

Behavioral economics - social norms

Social norms

Informing debtors of prompt repayment norms in their town resulted in  a 15% increase in payment rates

Behavioral economics - status quo

Status quo bias

Shifting an opt-in to an opt-out saving strategy for employees increased enrollment rates by 25%

Behavioral economics - framing

Framing

Providing a low-value option increased the perceived value (and likelihood of purchase) of remaining options by as much as 52%

Behavioral economics - personalization

Personalization

Including a client’s name in a reminder text message has shown a 10% improvement in debtor payment rates