This ppt tries to tell about the application of Data Science in Behavioral economics. Also, it attempts to discover the benefits of the same. Behavioral economics principles became important for companies as well as government and data science plays a crucial role in Behavioral economic analysis. This ppt gives information about how data science helps to behavioral economic models and how they are used by companies for policy-making.

1. APPLICATION OF DATA
SCIENCE IN BEHAVIORAL
ECONOMICS
How Data Science helps to explore Economic Behavior

2. ABOUT BEHAVIORAL ECONOMICS
• Behavioral economics combines elements from Economics, psychology, sociology, and
neuroscience, Cognitive Science to study how people make economic decisions. By relaxing
the assumptions of neo-classical economists, like the rationality of human beings, it seeks to
understand the cognitive and emotional biases that can affect economic behavior. Examining
why people make certain choices and how they respond to incentives, can help to improve
our understanding of market outcomes, policy design, and individual decision-making.
• Data Science plays a crucial role in the application of Behavioral economics in policy-
making
• Various Data Science tools like ML and big data are used for Behavioral Economic analysis

3. APPLICATION OF DATA SCIENCE
Predictive model: Data Science can be used to make predictive models that help predict the
consumer's economic decision-making.
ML (Machine Learning) is used for making various predictive models.
Examples:-
Decision tree model: It identifies the factors that influence consumer choices and predict
consumer preference.
Random Forest: It uses multiple decision trees to predict consumer response to marketing
strategies.
Neural Networks: It is used to predict the impact of various factors on investment decisions.

4. A/B TESTING AND
EXPERIMENTATION
A/B testing and Experimentation can be used to get insights into cognitive biases and their
influence on behavioral patterns.
• It observes how changes in presentation, wording, or framing affect decision-making. For
eg. Anchoring effect, loss aversion, and Framing effects. etc
• Researchers use the A/B test to design experiments that manipulate cognitive biases and
observe their effects on decision-making.
• It can also be used for other purposes like measuring emotional responses, or measuring
decision speed and accuracy, etc.
• Python is generally used for A/B testing.

5. OTHER DATA SCIENCE APPLICATIONS
• Sentiment Analysis: Textual data is analyzed through a sentiment analysis model to study
the emotional response of individuals to economic stimuli. It gives a better idea about a
consumer’s emotions and their effects on his/her cognitive processes, which eventually helps
Strategists frame and design their policies better.
• Neuro-Economics: Brain imaging data analysis is used to analyze neural processes which
affect economic choices.
• Fraud detection: Anomaly detection data techniques can be used to identify anomalous
behavior.

6. REAL-WORLD APPLICATION
SMART STRATEGIES OF APPLE
• Apple: A company with the world’s largest Market cap, used many behavioral Economics
Principles for its growth.
• Through proper data analysis, Apple studied various cognitive biases of the consumers like
the Halo effect, Endowment effect, and social proofing and made suitable marketing
strategies to increase its sales and profit.
• Apple uses tools like Big Data for behavioral economics analysis. Big Data is a study of
large data sets that studies trends, patterns, and behavior. Other than Big data Apple also uses
ML (Machine Learning).
• Apple used smarter Customer engagement strategies and many other strategies. through
behavioral analysis using big data and ML.

7. STRATEGIES OF STARBUCKS
Why Starbucks could sell such expensive coffee in price-sensitive markets like India?
• It is possible due to excellent Behavioral Economic analysis. With such analysis, Starbucks
came up with an irrational Value Assessment which is also known as the Starbucks effect.
• Starbucks uses data analysis tools like Big Data, ML.
Source: Internet

8. CONCLUSION
There are many companies like Apple, Amazon, Starbucks, Meta, etc. apply core
Behavioral economic analysis for their growth. These companies use data science tools
for behavioral economic analysis. Data science makes it possible to work with large data
in very little time and generate accurate results. It gives amazing insights to companies
for policy-making, or to make new marketing strategies.
The marriage of behavioral economic principles with data science not only propels
corporate growth but also steers government initiatives towards effective policy-making.
Governments worldwide, recognizing the efficacy of behavioral insights, employ
strategies like nudging, bolstered by data science, to optimize outcomes, be it in
enhancing tax collection or promoting compliance.

9. THANK YOU
Made by- Mayuresh Vichoray