Essay: Behavioral Economics Many Academics Advocate

Pages: 5 (1548 words)  ·  Bibliography Sources: 5  ·  File: .docx  ·  Level: Master's  ·  Topic: Economics

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[. . .] This is under the backdrop of increased profits and record earnings. Wells Fargo has now had 5 consecutive quarters of record earnings growth. However, due in part to regulation, the company is initiating cost cutting measures to insure the viability of the franchise. This again is a result of the economic forces prevailing in the market. As the psychology of the market changes, so too will the behavior of large and small businesses alike (Rabin, 1998). The same concepts apply to marketing and marketing related expense. Marketing particular for denigrated industries such as financial services will market themselves primarily to alter consumer sentiments. These sentiments through marketing can change the views of consumers as they establish a brand in their thoughts.

Conclusion

In conclusion, behavioral economics impacts decision making through emotions, prevailing sentiments, and the social aspect of business. These concepts all provide a means for business to obtain superior returns relative to their peers if they think rationally while ignoring emotions. However, many fortunes are lost due to the mass euphoria prevailing in the economy. Over priced mergers and acquisitions is just one method in which over optimism can cripple decision making. By realizing the prevailing sentiments in the markets management can make better informed financial decisions regarding their personal lives and business dealings.

References:

1) Shleifer, Andrei (1999). Inefficient Markets: An Introduction to Behavioral Finance. New York: Oxford University Press. ISBN…

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