BEHAVIORAL ECONOMICS IN CONSUMER DECISION MAKING

Abstract

This article explores how behavioral economics enhances the understanding of consumer decision-making processes by integrating psychological insights into traditional economic models. It examines cognitive biases, heuristics, and framing effects that influence choices, often leading to deviations from rational decision-making predicted by classical economics. The article discusses key concepts such as prospect theory, loss aversion, mental accounting, and nudging, highlighting their implications for marketing, policy design, and consumer welfare. The review underscores the importance of incorporating behavioral insights to better predict and influence consumer behavior.