Behavioural Economics

Running head: BEHAVIOURAL ECONOMICS
Behavioural Economics
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1BEHAVIOURAL ECONOMICS
Table of Contents
Introduction:...............................................................................................................................2
Brief overview:...........................................................................................................................3
Anchoring Bias in the context of marketing:.............................................................................3
Utilising the behavioural economics in case of an organisation:...............................................6
Conclusion:................................................................................................................................7
References:.................................................................................................................................8

2BEHAVIOURAL ECONOMICS
Introduction:
In real world, people receive greatest benefits and satisfaction by taking optimal
decisions. In the field of economics, people get large number of options along with scarcity
constraint from where they need to select the best option that can satisfy them significantly.
In this context, behavioural economics deal with psychological and economical aspects of a
human to understand about their irrational activity at the time of decision making (Wilkinson
and Klaes 2017). Heuristics implies as a rules of thumbs or cognitive shortcuts that can
simplify any decision. In this process, a person can easily substitute a difficult question with
comparatively easier one. Heuristics have some disagreements compare to rationality and
bias. A cognitive bias, on the contrary, implies a systematic error to think by considering that
judgement differentiated from the acceptable and desirable norms, based on former logic.
Sometimes, the heuristics applications become linked with cognitive biases that may arise
due to representativeness and availability though they cannot show that motivation of a
person rather these occur due to error outcomes based on information processing (Thaler
2017). Some other cognitive biases, which have functions of self-serving can motivate people
strongly. On the contrary, through some other types of biases like confirmation bias, people
can motivate or unmotivated. Some well-known forms of cognitive biases are anchoring,
framing, loss aversion and in temporal choice anomalies.
This report intends to select anyone of these biases to discuss further in the context of
practical example. This is because these forms of behavioural economics can be observed
within a business model along with pricing strategy and marketing technique and so on
(Astebro, Herz, Nanda and Weber 2014). This report considers the process of anchoring
based on which it can analyse a real as well as current model of business. After that, the
report will discuss that whether behavioural economics is more consistent than standard
concept of microeconomics or not.