Behavioural Economics

Behavioural economics is an important factor for improving the health care system.

Behavioural economics and its related area of study, behavioural finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions and their effects on market prices, returns and the allocation of resources. Behavioural economics models usually incorporate insights and studies from psychology with neo-classical economic theory.

Behavioural analysts are concerned with the effects of market decisions and that also points towards the type of public choice.

The central issue in behavioural finance is to analyse and explain why market players make systematic errors which affect prices and returns, creating market inefficiencies. Behavioural finance highlights inefficiencies such as under-reactions or over-reactions to the changing market trends. Such reactions are because of limited investor attention, overconfidence, over-optimism, mimicry (also known as herding instinct) and noise trading.

The behavioural analyst also studies and explains the asymmetry between decisions to keep or not to part with resources, known as the "bird in the bush" paradox, and loss aversion which is the unwillingness to let go of a valued possession.