BehavioralEconomics refers to economics study that tends to essentially laystrong focus on the economic decisions of various individuals orinstitutions while still strongly focusing on the effects of themarket prices on the choices. Rational ways of consumer’s decisionmaking processes and choices tend to strongly play a key role in thestudy of behavioral economics.
Agreat Economist, David Kreps, tends to outline a careful focus on thestudy of behavioral economics in his you tube video enStitled,Choice, Dynamic Choice & . Kreps carefullyanalyzes how individuals make personal choices, what drives theirselection of choices and how to some extent some models fail tocapture how people make various complex choices in real life. DavidKreps argues that various traditional economic models are now out oftouch with the reality. Kreps tries to bring out the fact that thedecision making rationale of various traditional models in thecurrent world have actually lost their accurate usefulness withregard to how people make important complex choices when caught up invarious circumstances, like for example when selecting what to buy atthe grocery.
Inthe current world, people are faced with circumstances that demandthe formulation of various complex choices on the side of theconsumer and thus available economic models ought to elaboratelybring out the true modality through which individuals make choices.In the formulation of various choices by individuals in behavioraleconomics, Kreps lays strong focus on the consistency of variouschoices made by consumers. In his explanations, Kreps tends to bebringing forth the urgent need for incorporating consistent choicesin the decision making process of various individuals. Kreps tries toexplicitly outline the importance of the need for consumers to makevery consistent choices. The main reason Kreps tends to lay strongemphasis on the consistency of choices is because of the expectedrepercussions of the choices made by various individuals. The choicesmade by various persons actually have a strong impact on theirtomorrow. This means that, for consumers and all persons in generalto be able to definitely plan and predict their future, then theyhave to seriously refine their decision making process so as o ensurethat their choices of various goods and services are very consistentover time.
Throughthis, Kreps tends to discourage against instances of impulse andhaphazard purchases. This is because, they bring about an irregularpattern about the future and this can strongly affect tomorrow. Ifone break his pattern today and spends more than anticipated, thenthe effect is carried over to tomorrow in the form of for examplereduced savings. This automatically has a direct effect on the lifeof tomorrow. If one consumes on a consistent budget, then thedecision influences his nature of life tomorrow which is less likelyto be altered because it is well planned for today.
Theother factor that David Kreps tends to give special attention in hisaddress is the issue of availability of information in the choicemaking process. Kreps values adequate provision of essentialinformation to the consumers to help them make proper choices. Hecites lack of proper information as a major cause of choicedisruptions that ultimately leads to a shift of the anticipations andplans for tomorrow. Impulse purchases or less than anticipatedpurchases by consumers are strongly contributed to by theavailability of inadequate information. When a rational consumer forinstance walks into a grocery and realizes that the price of what heor she went to purchase has dropped, he is more likely to purchasemore of the product due to the surplus cash that is available fromthe initial planning. On the other hand, when a rational consumerequally finds that the price of the commodities he wanted to buy haveshort up in terms of price, they are equally more likely to spendmore than they had planned for, and this in reality disrupts theconsistency of choices due to the effects of information flow. Thus,Kreps states that it is pretty essential that consumers get access toproper information about the products they wish to purchase in timeso as to facilitate their decision making processes and ensureconsistent choices.
Additionally,Kreps says that due to the need of various dynamic choices, it ispretty essential that individuals be able to analyze in detail theproblems they have in hand and lay working strategies to ensure theyget the most desirable outcomes. Working strategies are a key pillarin the determination of various desired outcomes. Once the consumershave identified the main complex problems they are encountering,appropriate strategies help them plan on how to arrive at theirvarious desired outcomes to help them keep making consistent choicesfor the god of their future.
Thus,Economist David Kreps has a strong point to pass across with regardto the making of consumer choices in behavioral economics. Krepsreiterates on the need for consistency of consumer choices for abetter tomorrow. He insists that consumers need to make rationalinformed choices in their selections in addition to identifyingproblems and laying appropriate strategies to achieve desireoutcomes.