Behavioural Economics and Decision Making

Abstract

For a considerable time, conventional economic models have assumed that people make logical judgements when presented with all available information; nevertheless, actual data frequently challenges this presumption. This study explores the fascinating field of behavioural economics and decision making, illuminating the complex interactions between emotions, social influences, and cognitive biases that affect our decision-making. The trip starts with Prospect Theory, which revealed the human propensity to place a higher value on losses than gains and completely changed our understanding of how people make decisions in risky and uncertain situations. The "nudging" theory developed by Thaler and Sunstein shows how little interventions can improve decisions and open the door to new policy applications. By disproving the idea of irrationality, Gigerenzer's investigation of constrained rationality highlights the function of heuristics in streamlining difficult decisions. A recurring topic is real-world applications; Duflo, Kremer, and Robinson's work demonstrates how behavioural insights might enhance agricultural performance. As behavioural economics develops further, it presents interesting directions for future study, such as the dynamics of group decision-making, the creation of policies, and the impact of technology on decision-making. In summary, behavioural economics goes beyond the classroom and offers a useful lens through which we may see the intricacies of human decision-making.