Behavioral Economics and Decision-Making under Uncertainty

Abstract

Behavioral economics explores the psychological influences on economic decision-making, challenging the traditional models that assume individuals act rationally. Under uncertainty, the decisions made by individuals deviate from the predictions of standard economic theory. This paper investigates how biases, heuristics, and cognitive limitations affect decision-making under uncertainty, examining real-world cases in financial markets, consumer behavior, and public policy. By analyzing the implications of these behaviors, we provide insights into improving decision-making processes in uncertain environments. The paper offers theoretical frameworks, empirical evidence, and policy recommendations to better align individual decision-making with optimal economic outcomes.