Behavioral economics is a field of economics that integrates insights from psychology to explain why people often make decisions that depart from the predictions of standard rational-choice models.
Behavioral economics studies how individuals and institutions actually make decisions, in contrast to the fully rational, utility-maximizing agent assumed by neoclassical theory. It emerged from the work of psychologists Daniel Kahneman and Amos Tversky in the 1970s, whose research on judgment under uncertainty introduced prospect theory, and was extended into economics by Richard Thaler.
Central ideas include bounded rationality, cognitive heuristics and the systematic biases they produce, loss aversion, mental accounting, and the influence of how choices are framed. The field also studies choice architecture and "nudges" — small changes to how options are presented that predictably shift behavior without restricting freedom of choice. Its findings are applied across marketing, finance, public policy, and product design, and several of its contributors, including Kahneman and Thaler, have received the Nobel Memorial Prize in Economic Sciences.