For instance, the evidence shows that people are sensitive to the way that information is presented – the so called ‘framing effect’ – and that decisions can reflect emotions and biases, such as overconfidence or loss aversion. These fields are beginning to shape financial regulation, since the research shows that people often make predictable, persistent and costly errors when choosing and using financial products.
The models developed by researchers allow us to understand why these errors arise and what we can do to ameliorate them. In relation to policy impact, the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act in the United States was informed by behavioural evidence that showed that consumers misunderstand the true cost of credit.