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Behavioral economics is a branch of economics that studies the changes in economic decision making of individual economic units like persons or institutions as a result of changes in market prices, investment returns and resource allocation and the subsequent impact of these factors on social, cognitive and emotional concerns. It seeks to do so by making behavior models which integrate concepts of psychology and the neo-classical economic theory to understand the ration decision-making process of economic units. Some of the major themes in behavioral economics are heuristics, framing and market inefficiencies. This discipline focuses on both the market aspect and the public aspect of economic interactions and decision-making. Heuristics are the decisions made by persons on the basis of prior experience and knowledge relevant to the particular issue. Framing refers to the most common assumptions and stereotypes used by the person during decision making which are formed on the basis of popular social opinion and perception and market inefficiencies are the changes in market conditions and product values due to regulatory interventions, behavioral biases and resultant market anomalies.
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