Behavioral economics is a field of study that combines insights from psychology and economics to understand how individuals make decisions in various contexts. Unlike traditional economics, which assumes that individuals are perfectly rational and always make decisions that maximize their utility, behavioral economics recognizes that people often behave in ways that deviate from this idealized rationality due to cognitive biases, emotions, social influences, and other factors.

Behavioral economics examines phenomena such as bounded rationality (the idea that individuals have limited cognitive resources and cannot always make perfectly rational decisions), loss aversion (the tendency to prefer avoiding losses over acquiring equivalent gains), present bias (the tendency to prioritize immediate rewards over larger but delayed rewards), and framing effects (the way in which information is presented influences decision-making).

By understanding these psychological mechanisms, behavioral economists aim to develop more accurate models of human behavior and decision-making and to design policies, interventions, and incentives that nudge people toward better choices in areas such as health, finance, education, and public policy.