Behavioral science findings to improve the quality of regulation

Why do people postpone the choice of a new telecommunication supplier or bank which offers better conditions? Why choose clearly risky investments? These and many other examples of departures from rational choices, so-called biases in judgment, question the assumption that people and firms are always self-interest maximizers. Moreover, these biases offer crucial information to rule-makers on the reactions of end-users, and in so doing they enable the better formulation of rules and the provision of more adequate responses to the public interest they are intended to satisfy. Economic analysis of rules in the regulation life-cycle allows the use in the decisionmaking process of knowledge about cognitive and decisional processes and helps to limit the risk of paternalistic regulations. In order to fulfill this role, economic analysis itself must evolve both in terms of information gathering and in terms of evaluating the impact of rules, in order to consider the degree of risk that end-users' decisions might be biased.