24 February 2016
Behavioural Economics is one of the key terms related to the economic decision-making processes of individuals and institutions. It is a widely belief that people are rational, fully aware of options; they always rank their preferences and choose the best option they like. However, it’s not always true. Behavioral Economics studies, thus explore why people sometimes make irrational decisions, and why and how their behaviors do not follow the predictions of economic models. In a 90-minute session, Mr. Simanta spoke to the students to help them understand what Behavioural Economics is, its importance and application in the real-life businesses.
Mr. Das, first, proved his point of view that human is not always rational by small activities which required students answer several questions on paper sheets. The result showed that not all the numbers we wrote down came from rational thinking. Instead, it is a concept of a single-minded focus and dedication toward a singular goal or objective. Then, Mr. Das used stories such as the story of the gosling, Cokes in the fridge, gain and loss, etc. to explain more about the behavioral economic concept. It is the study of the effect of psychological, social, cognitive and emotional factors on the economic decision.
During the course of the discussion, he explained in detail how important behavioural economics is and how to apply behavioral science to business. Each business, company or organisation needs to know how to create completely new anchors for new products or services, how to contextualise, decoy effect, as well as loss aversion in action. To each point of view, Mr. Das gave simple examples to illustrate and help students fully understand the point.
Towards the end, Mr. Das drew a conclusion that there is a strong relationship between customer behavior and economics. Behavioral science, therefore, really plays an important role in negotiating and dealing with customers, or partners, but how to measure, control, and apply this to business depends on each individual and organization.
Key Learning from the event: