20. Behavioural Economics Applied

Suggestions for Policy Making

  1. Paul R. Martin2,
  2. Fanny M. Cheung BA PhD3,
  3. Michael C. Knowles MCom (Qld), PhD (Edin)4,
  4. Michael Kyrios5,
  5. J. Bruce Overmier6 and
  6. José M. Prieto7
  1. Gerrit Antonides MD, PhD

Published Online: 20 APR 2011

DOI: 10.1002/9781444395150.ch20

IAAP Handbook of Applied Psychology

IAAP Handbook of Applied Psychology

How to Cite

Antonides, G. (2011) Behavioural Economics Applied, in IAAP Handbook of Applied Psychology (eds P. R. Martin, F. M. Cheung, M. C. Knowles, M. Kyrios, J. B. Overmier and J. M. Prieto), Wiley-Blackwell, Oxford, UK. doi: 10.1002/9781444395150.ch20

Editor Information

  1. 2

    Griffith University, Queensland, Australia

  2. 3

    Chinese University of Hong Kong

  3. 4

    Monash University, Melbourne, Australia

  4. 5

    Swinburne University of Technology, Australia

  5. 6

    University of Minnesota, USA

  6. 7

    Complutense University of Madrid, Spain

Author Information

  1. Wageningen University, Netherlands

Publication History

  1. Published Online: 20 APR 2011
  2. Published Print: 1 APR 2011

ISBN Information

Print ISBN: 9781405193313

Online ISBN: 9781444395150



  • Behavioural Economics Applied: Suggestions for Policy Making - works of Herbert Simon on “satisficing” and “bounded rationality” in decision making, and those of George Katona on role of “consumer expectations”;
  • behavioral economics - accepted as a more realistic way of doing economics;
  • Mullainathan and Thaler, defining behavioral economics - as “the combination of psychology and economics, investigating what happens in markets in which agents display human limitations and complications”;
  • bounded rationality, by Kahneman - distinguishing between two types of thinking;
  • applying behavioral economics to policy - behavioral economics, instances in which people reach suboptimal solutions, or act against reaching their objectives;
  • behavioral-economic policy applications;
  • contrast, compromise, and format effects - adding inferior alternatives to a choice set, increasing people's preferences for original choice options;
  • small probabilities, people tending - to neglect small probabilities, focusing on magnitude of outcome;
  • motivational effects, impatience - advancement of consumption, followed by immediate regret after purchase;
  • economics, basic discipline - describing economic behavior in market environments


This chapter contains sections titled:

  • What is Behavioral Economics?

  • Applying Behavioral Economics to Policy

  • Behavioral-Economic Policy Applications

  • Conclusion

  • References