Here.
While it is common sense that people make mistakes, behavioural economics takes us beyond intuition and helps us be precise in detecting, understanding, and remedying problems that arise from consumer mistakes. Integrating behavioural economics into the FCA can therefore help it be an effective regulator. This paper has two parts. In Part I we summarise the main lessons from behavioural economics for retail financial markets: • how consumers make predictable mistakes when choosing and using financial products; how firms respond to these mistakes, and • how behavioural biases can lead firms to compete in ways that are not in the interests of consumers. In Part II we describe how behavioural economics can, and should, be used in the regulation of financial conduct.
While it is common sense that people make mistakes, behavioural economics takes us beyond intuition and helps us be precise in detecting, understanding, and remedying problems that arise from consumer mistakes. Integrating behavioural economics into the FCA can therefore help it be an effective regulator. This paper has two parts. In Part I we summarise the main lessons from behavioural economics for retail financial markets: • how consumers make predictable mistakes when choosing and using financial products; how firms respond to these mistakes, and • how behavioural biases can lead firms to compete in ways that are not in the interests of consumers. In Part II we describe how behavioural economics can, and should, be used in the regulation of financial conduct.