Traditions and Trends: Exploring Diwali Through the Lens of Behavioral Economics

    This Diwali, I found myself immersed in the warmth of age-old traditions while experiencing the excitement of modern trends. As I lit lamps, hung lanterns, and exchanged gifts, I began reflecting on how these timeless customs intersect with behavioral economics. Below are some of my observations on how modern behaviors during Diwali align with key concepts from behavioral economics.

   One of the most cherished Diwali traditions is buying new clothes. Diwali was often the only time new clothes were purchased in the past, particularly during our parents' childhood. Today, however, brands offer significant discounts and limited-time offers during the festive season. This is where the concept of anchoring comes into play: brands display high original prices to make discounted prices appear even more attractive. As a result, many people experience FOMO (fear of missing out) or loss aversion when faced with these deals, often leading them to purchase more than they actually need. While the tradition of shopping remains important, modern marketing strategies leverage behavioral biases to influence consumer decisions.

    Another interesting observation is the way social media has transformed Diwali. Decorating homes with lights and diyas holds deep spiritual significance, but the modern trend of showcasing these decorations online is a clear example of social proof. People feel compelled to display their Diwali decorations on social media simply because they see others doing the same, reinforcing the idea that one should participate in these trends.

    The traditional use of diyas has also evolved, influenced by government efforts to promote environmentally conscious choices. Nudging has played a role in encouraging the use of eco-friendly or clay-made diyas, as well as in the growing movement to ban firecrackers in favor of quieter, greener celebrations.

   Similarly, the custom of gift-giving during Diwali, originally tied to goodwill and blessings, has become influenced by the modern concept of reciprocity. The expectation to exchange gifts can create pressure to select expensive or extravagant presents, shifting the focus from the original sentiment of generosity to the need for equivalence.

   Diwali remains a celebration of light, tradition, and togetherness with family and friends. Yet, in today’s world, our behaviors are shaped not only by these ancient customs but also by modern psychological influences. As we continue to observe these changes, it becomes clear how deeply behavioral economics impacts even our most cherished celebration.