Behavioural Economics today, The Decoy Effect, Maslow's Hierarchy of needs and MINDSPACE
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Course
Behavioural Economics (COM5001)
Institution
St Marys University College Twickenham
This document provides you with detailed definitions of Neoclassical Economics and Behavioural Economics. Furthermore, it includes some critical concepts in Behavioural Economics, such as The Decoy Effect, Maslow's Hierarchy of needs and MINDSPACE. These are good notions to talk about in your asses...
Why will BE help marketers to make better decisions in
the future
It is important to combine human and behavioural insights with economic
analysis. This helps us to explore the contrast between what rational
agents do according to traditional economic theory and how humans
actually behave.
Neoclassical Economics Definition:
Neoclassical Economics is an approach to economics in which the
production, consumption and valuation (pricing) of goods and services
are driven by the supply and demand model.
Supply and demand model in = Supply and demand determine the price
of a good. If the price increases, the demand decreases and is inferior to
the supply and viceversa, if the price decreases the demand increases
and is superior to the supply.
Behavioural Economics today
Behavioural economics today studies the effects of psychological,
cognitive thinking, emotional, cultural and social factors on the 1)
economics/buying decisions of individuals and institutions and 2) how
those decisions vary from those implied by classical theory.
Law of transitivity (Chapman University, 2015)
Economists base their thinking about BE on defining a relationship
between goods and services. Example: If someone prefers coffee to tea
and tea to hot chocolate, does that actually mean that they prefer coffee
to hot chocolate? — This depends on understanding preferences through
communications and marketing research techniques through qualitative
and quantitative research.
Neoclassical Economics can estimate demand but consumer insight and
research is better for understanding needs.
Consumer insight helps organisations to sell more and more often to
given consumers. Nowadays, there is too much data to analyse, so we
have to prioritise the right one. Good marketers need to be good macro
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