Reviewing the literature on behavioural economics

Abstract

This article presents a survey of the scholarship on behavioural economics. The literature on behavioural economics has been growing significantly in the last few years, and its findings have become increasingly influential in shaping the agenda of regulators around the world. Existing scholarship mostly focuses on determining whether seemingly irrational decision-making can be explained by behavioural biases, and on analysing potential regulatory responses to protect consumers from the consequences of these biases. In the end, it seems that there is significant support in the literature for the notion that certain categories of consumers of financial products are particularly vulnerable to behavioural biases, and that market-based solutions are insufficient to address this vulnerability. However, the design of alternative regulatory strategies can prove difficult.