Nudges and Behavioral Economics

In the context of behavioral economics, nudges are persuading techniques designed by policy ­makers or field experts to affect and shape people’s behavior in reaching desired outcomes through psychologically related mechanisms. These techniques are believed to work more [Page 1191]effectively than those from other theories in prescription, such as the rational choice theory model, which assumes perfect knowledge, reasoning capability, and information accessibility in humans but with similar goals to achieve economic equilibrium. According to findings in behavioral economics, people have various biases in making decisions across their lifetime, leading to suboptimal results. These biases are from limitations in human cognition and intuition, incomplete access to information and to changing external factors, emotions, and other aspects of human nature that work at odds with the ...