Decision Making Under Uncertainty: Insights from Behavioral Economics and Cognitive Psychology

Abstract

Navigating uncertainty is a fundamental aspect of human decision-making. While traditional economic models assume rational actors maximizing expected utility, the reality is often more nuanced. This article explores the intersection of behavioral economics and cognitive psychology to provide insights into how individuals actually make decisions under uncertain conditions. Key concepts such as bounded rationality, heuristics, framing effects, and prospect theory are discussed, revealing systematic biases and deviations from the rational model. The article highlights the implications of these findings for various domains, including individual finance, business practices, and public policy. Finally, it addresses potential limitations and suggests avenues for future research.