Behavioral Economics in Judicial Recovery: An Innovative Approach to Overcoming Challenges In times of crisis, companies in financial difficulties seek judicial recovery as a way to restructure their debts and resume growth. However, the process is complex and requires a deep understanding of the factors that influence the success of the recovery. It is in this context that behavioral economics emerges as an innovative tool to help companies and creditors overcome the challenges that arise. The article “Recovery Behavioral Economics”, published in Conjur on April 10, 2024, highlights how this area of knowledge can be applied to judicial recovery. The author, Daniela Vianna, a lawyer specializing in business law, points out that behavioral economics studies how individuals make decisions in complex and uncertain situations, such as that which occurs in a judicial recovery process. By understanding the cognitive biases and emotions that influence the behavior of companies and creditors, it is possible to create more effective strategies for debt negotiation and the implementation of the recovery plan. The author cites as an example the use of “nudging” techniques, which consist of small changes in the decision-making environment that can lead to significant changes in people’s behavior. One of the main challenges of judicial recovery is the asymmetry of information between debtors and creditors. Behavioral economics can help reduce this asymmetry by providing tools for the parties involved in the process to better understand the reasons that lead to certain behaviors and make more informed decisions. Another important challenge is the need to reach a consensus between the parties for the approval of the recovery plan. Behavioral economics can help build an environment that is more conducive to negotiation, by identifying points of convergence between the interests of those involved and by proposing solutions that maximize value for all. More studies and research are still needed to assess the impact of behavioral economics on judicial recovery. However, the outlook is promising. The application of this area of knowledge can help increase the chances of success in judicial recovery processes, benefiting companies, creditors and society as a whole.
Behavioral economics has emerged as an innovative and effective approach to understanding and changing economic behaviors. This field of study, which combines elements of psychology and economics, provides valuable insights into how people make financial decisions and how these decisions can be influenced and improved.
Understanding Financial Decisions
Behavioral economics assumes that humans are not perfectly rational economic agents, as is often portrayed in traditional economic theory. Instead, it recognizes that our financial decisions are influenced by a range of psychological, social, and emotional factors.
Through studies and experiments, behavioral economists have identified a number of cognitive biases and heuristics that affect our financial choices. For example, we tend to be overconfident in our investment abilities, which can lead to risky decisions and financial losses.
Recovery Interventions
Among its most important contributions, behavioral economics has the ability to propose interventions to correct harmful financial behaviors. These interventions do not restrict your freedom of choice.
For example, a “nudge” might involve simplifying options investment in a retirement plan, making it easier for workers to join a retirement savings plan. Another example would be using automatic reminders to encourage timely bill payments and avoid late fees.
Application in Economic Recovery
In times of economic crisis, such as the one we are currently facing due to the COVID-19 pandemic, behavioral economics plays a crucial role in fostering economic recovery. By understanding consumer behavior patterns and the psychological barriers that may impede economic recovery, policymakers can design more effective economic stimulus measures.
For example, communication campaigns that highlight the importance of trust and cooperation can help restore consumer confidence and stimulate consumption. In addition, financial incentive programs, such as vouchers or discounts, can encourage consumers to resume their purchasing habits and boost economic activity.
Image: ARIÊ FERNEDA
