This article, written by Shaun P. Hargreaves Heap, delves into how behavioural economics affects explanation and prescription. What this means is this article depicts why some things are explained the way they are thanks to economics and in particular behavioural economics.
In the second section of this article titled ‘Anomalies in individual decision making’ Heap discusses what can alter an individuals decision. One experiment he refers to is when half of a sufficiently large pool of subjects is given an object, the example used is a mug in this instance. They are then all asked to put a monetary valuation on the mug and it was observed that those with a mug placed a notably higher valuation on the mug than those without one. This is called loss aversion. He used this example as one of few, to explain the
A question that crossed my mind whilst I was reading this article was ‘Could everything be explained using logic drawn from behavioural economics?’ This is because many decisions taken by people, whether they are consumers or producers, involve some sort of rationality in order to make that decision. There are many factors that can influence the decision makers thought processes, such as money (if the price is too high, they might decide not to purchase a certain product) or relationship with the other party (if the decision maker is friends with the other party their decision might be influenced by their friendship).