Behavioural Economics

What is Behavioural Economics?

Behavioural Economics combines insights from psychology and economics to state how people make decisions in the real world. Unlike traditional economic theory that assumes people always make rational choices, behavioural economics recognizes that human decision-making is influenced by cognitive biases, emotions, social factors, and environmental cues.

This area of interest presents how psychological, social, cognitive, and emotional factors affect economic decisions and how those decisions deviate from what would be expected under rational choice theory. Key concepts include loss aversion (people feel losses more strongly than equivalent gains), anchoring (relying heavily on the first piece of information encountered), choice architecture (how options are presented affects decisions), and present bias (preferring immediate rewards over future benefits).

Why is Behavioural Economics Important in UX?

Behavioural Economics is important in UX because it connects existing psychological insights with economic theory, providing a set of principles of how users make decisions, rather than how we might assume they do. Understanding these patterns helps designers create (persuasive) experiences that work with human psychology rather than against it. By recognizing cognitive biases and decision-making shortcuts, designers can create more intuitive, effective, and persuasive experiences.

These principles can be applied to improve conversion rates, increase user engagement, and guide users toward beneficial behaviors. For example, understanding loss aversion might lead to framing features in terms of what users might miss rather than what they'll gain, while knowledge of social proof can inform the design of review systems. However, with this power comes ethical responsibility to use these insights to help users achieve their genuine goals, not manipulate them.

How to Apply Behavioural Economics in UX Design?

To apply behavioural economics in UX design, apply the power of defaults by setting smart default options that benefit users, use loss aversion by framing choices in terms of what users might lose rather than gain when appropriate, implement social proof by showing how others are using your product or service, and create a sense of scarcity or urgency when genuine limitations exist.

Additional strategies include simplifying choices to avoid decision paralysis, breaking complex tasks into smaller steps to overcome present bias, using anchoring to establish reference points for pricing or other values, and designing choice architecture that guides users toward beneficial decisions while preserving their freedom to choose. Always test these approaches with real users and consider the ethical implications of using psychological principles to influence behavior.