Cognitive biases and their impact on the behavior of an individual | Vestnik Tomskogo gosudarstvennogo universiteta. Ekonomika – Tomsk State University Journal of Economics. 2015. № 2 (30).

Cognitive biases and their impact on the behavior of an individual

The relevance of study stems from the restricting nature of the theoretical models of individuals' economic behavior. This paper suggests classification criteria for the effects that influence the behavior of individuals based on assumptions of the homo economicus model. A person does not always act rationally, maximizes their utility function, and matches the benefits and costs to make decisions. The authors have attempted to determine the impact of cognitive biases on the effectiveness of the individual's solutions in different economic situations. Cognitive biases are systematic errors in the thought process related to the influence of the preformed affirmations on the individual's decisions. The study revealed that cognitive biases affect the individual's behavior in a situation of choice. The psychological effects restricting the rational behavior of an individual are correlated with economic categories (risk, rationality, information, time, rules and regulations) with a view to converge them with the model of an economic man, and a more accurate description of the behavior of individuals making choices in a situation with limited resources. When an individual finds themselves in various economic situations, they are not always able to estimate all their actions a few steps forward. As a result, their decisions do not lead to the most optimal outcome. For example, when investing funds, investors do not always act rationally and are prone to make mistakes due to prejudice, stereotypes, emotional state, et cetera. The classification of cognitive biases affecting decision-making in the economic domain presented in the paper is based on major economic categories (risk, rationality, information, time, institution). The impact areas of the psychological effects on the individual are demonstrated. This list is incomplete, but it comprises examples most clearly manifested in the situation of economic choice. The economic consequences (loss of revenue, increased costs) of neglecting the influence of systematic errors in decision-making in the market interaction are shown as well. It should also be noted that this study has practical value in terms of possible use of the results to improve forecasts and the possibility of regulating the relations in the course of interaction between economic agents. In the future, the use of the obtained results can help in the development of mechanisms to coordinate the subjects of the market economy. Further research is required to present concrete recommendations for the creation of the new and changing the existing rules of market interaction considering the behavioral mechanisms of imperfect individuals. In this regard, consideration of the human factor in the economic decision-making will enable bringing the abstract model of an economic man to reality.

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Keywords

экономическое поведение, принятие решений, потребительский выбор, психологические эффекты, когнитивные искажения, Economic behavior, Efficiency, Decision-making, Consumer choice, Psychological effects, Cognitive biases

Authors

Name	Organization	E-mail
Kashapova E.R.	Tomsk Polytechnic University	kashapovaer@gmail.com
Ryzhkova M.V.	Tomsk Polytechnic University	marybox@inbox.ru

Всего: 2

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