The Influence of Cognitive Distortions on the Individual Behavior in the Decision-Making Process in the Modern World

Abstract

In the modern world, in connection with the technological process development and the information flow improvement, the individual behavior in the economic choice implementation is largely based on the psychological action of the decisions made on it from the outside. Psychological effects limiting the individual rational behavior are correlated with economic categories (risk, rationality) in order to more accurately describe the behavior of individuals making choices in a situation with limited resources. Choice implies the making by the individual of the best among alternative decisions, in which maximum satisfaction of needs is achieved with a minimum of costs. By making decisions under risk conditions, rational individuals must adequately assess the probabilities of future events, striving to maximize utility. Meanwhile, not all people are able to assess even any significant part of the available alternatives, since a person's cognitive abilities are limited. The article discusses the cognitive distortions relationship with the individual economic choice in order to determine the impact on real economic phenomena and processes, as well as the main theoretical aspects of psychological effects (cognitive distortions). In addition, the article defines the reasons for erroneous actions of the individual, provides examples of cognitive distortions affecting the consciousness and sub-consciousness of the individual, and also presents statistical data on changes in the individual’s mental state.