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In designing a public policy (Alcott, H., and S. Mullainathan, 2010), the behavior of citizens has commonly been modeled under the assumption of rationality, digging more into the research has proven that human beings are not rational decision-makers. The decisions are made on several governing factors like basis the events, situations, and ability to handle them affects the decisions made by an individual which can be taken in considerations to help and empower an individual to make better choices.
To help improve an individual’s decision-making (Thaler, 2013) and influencing positive behavior, there is a concept in behavioral science, political theory, and behavioral economics called nudge. Everyone sometimes acts against their self-interest which is described by Nobel Laureate Daniel Kahneman as two distinct systems for processing information (Tversky, A. and D. Kahneman, 1974):
System 1: Fast, automatic, and highly susceptible often used while time constraints or judgmental heuristics for faster resolution.
System 2: Slow, reflective, and usually accountable for explicit goals.
It has also described as maladaptive behavior by Thaler and Sunstein where system 1 overrides the explicit goals which explain that human habitual behavior (Thaler, 2000) doesn’t change without causing a disruption that triggers the behavior as per the surroundings.
Nuding is a concept of behavioral science that talks about indirect suggestions which could influence the thought process and decision-making ability of an individual or group (Thaler, Richard H, and C. R. Sunstein, 2008). The judgmental heuristic often aims the nudging technique to the advantage of creating a set of choices (Baumeister Et. al., 2001). E.g.: If there is a faster and reliable choice, the outcome would be more positive like a food chain store's choice of delivering ready-made food or the fruits provided a healthier option is ready to eat with faster service and delivery.
Cognitive biases is the term in psychology and behavioral economics that talks about systematic patterns of deviation. Biases impacting investment decisions (Barber & Odeon, 2001) are as follows: