Behavioral Economics is the study of psychology as it relates to the economic decision-making processes of individuals and institutions. Behavioral economics is often related with normative economics. It draws on psychology and economics to explore why people sometimes make irrational decisions, and why and how their behavior does not follow the predictions of economic models. KEY TAKEAWAYS Behavioral economics is the study of psychology that analyzes the decisions people make and why irrational choses are chosen. Behavior economics is influenced by bounded rationality, an architecture of choices, cognitive biases, and herd mentality. Behavior economics is crafted around many principles including framing, heuristics, loss aversion, and the sunk-cost fallacy. Companies use information from behavioral economics to price their goods, craft their commercials, and package their products. Starbucks' limited season drinks, Amazon's Lightning Deals, or "buy one, get one" prom