The main question of this paper concerns the comparison of behavioral and mainstream economics. The concept follows a straight line from different approaches and ideas of various authors stating their opinion on behavioral economics as well as mainstream economics.

Mainstream economics is defined as the maximization of an individual’s utility function, whereby the utility is a function of quantity of goods or services (McDonald, 2008), the basis of this concept tries to explain human behavior on the fact that people’s consumption is important to them.

In comparison to mainstream economics, behavioral economics focuses on psychological foundations trying to explain people’s behavior on the marketplace (Camerer, 2002).

Some benefits and challenges of behavioral economics: such as the fact that it tries to explain behavior not only rationally but includes psychological aspects or the challenge of various approaches of practitioners of behavioral economics will be discussed as well.

For the final comparison seven principles of Dawnay and Hetan (2005) will be used, which is the most understandable and easy applying criteria. These are as follows: Behavior of other people matters, meaning that we are influenced by other people; habits, which are hard to change; doing the right thing, namely, if we fail we are disappointed; expectations, including perceptions of how others should behave; loss aversion, involving the fact that humans try to avoid losses; computation problems, meaning that probabilities are hard to calculate by hand; and involvement and effectiveness, refereeing to the fact that people who are involved in different activities are more motivated.

These seven principles help to compare mainstream and behavioral economics. Nevertheless a lot of different approaches and considerations of theories heavily influence the final comparison as it does not simplify the result.

As there are no major publications on behavioral economics in comparison to the conventional or standard economic model this paper should identify the main differences of the two approaches.

The idea of presenting the results of the comparison is to apply all mentioned theories and create a comparison of many strands. Therefore it was decided that simple principles will be used for the final comparison of behavioral economics and mainstream economics.

Presentation of the Problem

The main questions of this paper which will be answered, are: