Behavioral Economics is a relatively new discipline in the social science field where economics meats psychology and starts to treat people not like perfectly rational agents, but rather like sophisticated and often irrational human beings. This implies that as we act in business and the economy at large, our decisions are hugely affected by emotions, feelings, personal preferences, social norms, cognitive biases, etc.
If we take a scientific approach and incorporate the evidence-based understanding of human nature not only in our economic models but also in management practices, we can unleash the huge potential of organizations, drive competitiveness, profitability, and satisfaction of people at work.
What behavioral economics has to offer to the broad field of management sciences, is a close look and the very roots of human behavior in the economic setting. The two major areas of focus in behavioral economics are cognitive biases and choice architecture which can be designed so as to nudge people into making better choices while putting no limits on their freedom.
Insights from behavioral economics can be applied not only to the study of consumer behavior, but also to gain valuable insights into public policy sector, healthcare, industrial organization, human resources management, negotiations, contracts, etc.