Behavioural Science

Daniel Kahneman has passed away , leaving behind a body of work that has significantly influenced how we think about economics and decision-making. Kahneman was not only a pioneering figure in psychology but also a key player in the development of behavioural economics, a field that merges insights from psychology with economic theory to better understand how people make decisions. His collaboration with Amos Tversky was central to his achievements. Together, they introduced ideas that challenged the conventional wisdom of their time. Unfortunately, Tversky passed away before they could jointly receive the recognition many believe they both deserved, notably the Nobel Prize in Economics which Kahneman won in 2002. This partnership was crucial in advancing their research and ideas. Three contributions by Kahneman particularly stand out for me: 1. Behavioural economics: Kahneman played a major role in developing this field, showing how psychological factors affect economic decisions. Thi...

Ever wondered what happens when the heat of a Paris summer meets the complexity of Game Theory?  🔥  I sure found out, and not in the way I expected. Enrolled in what I thought would be a 'beginner's course' at the Paris School of Economics, I soon found out I was way out of my depth. Between the heat and the advanced material, I'll be honest: I didn't learn as much as I'd hoped 😅 But it made me curious and I started learning more about it by myself. Game Theory is basically the study of strategy. It looks at the choices we make when those choices aren't just about us but also about what others decide to do. It's like trying to figure out your next move in chess, knowing that what you do depends on what your opponent does. You might have heard about the Prisoner's Dilemma , a classic example in game theory that illustrates the conflict between individual and collective interests. In this scenario, two participants must choose between cooperating or ...

Do you meticulously weigh all available options, striving to achieve the best possible outcome? Or are you content with solutions that meet your criteria and are deemed "good enough"? Maximisers , as coined by psychologist Barry Schwartz, are individuals who tirelessly pursue the best possible outcome in their decisions. They meticulously analyse options, seeking to maximize utility and satisfaction. In contrast, satisficers , a concept introduced by Herbert Simon, opt for solutions that meet their criteria and are "good enough." From an evolutionary standpoint, both maximization and satisficing strategies have adaptive significance. Maximization may have evolved as a mechanism to secure the best possible resources and opportunities, enhancing survival and reproductive success. On the other hand, satisficing conserves cognitive resources and minimizes risk, allowing individuals to make efficient decisions in dynamic environments. Now, consider the scenario of inves...