Behavioral Economics and Consumer Decision-Making: An Integrative Review
Md Morshedul Hasan1*, Farhana Karim2, Md. Baki Billah Ripon3
Business & Social Sciences 3(1) 1-8 https://doi.org/10.25163/business.3110228
Submitted: 13 January 2025 Revised: 05 March 2025 Published: 08 March 2025
Abstract
Behavioral economics has fundamentally reshaped our understanding of consumer decision-making by challenging the classical assumption of rationality. Unlike traditional models that posit consumers make optimal, utility-maximizing choices based on complete information, behavioral economics highlights the pervasive influence of cognitive biases, heuristics, emotions, social factors, and bounded rationality. This integrative review synthesizes decades of research, focusing on four key themes: cognitive shortcuts and biases, emotional drivers of behavior, social influences on consumption, and the impact of framing and choice architecture. Landmark studies reveal patterns such as loss aversion, anchoring, and the endowment effect, demonstrating systematic deviations from rational choice. Emotions like regret and anticipation further modulate consumer preferences, while social norms and peer influences subtly shape purchasing decisions. Moreover, the structuring of choices through nudges or defaults profoundly impacts consumer behavior without altering economic incentives. By weaving together insights from economics, psychology, and marketing, this review provides a nuanced framework for understanding real-world decision-making. It argues that integrating behavioral insights leads to more effective marketing strategies, public policies, and business practices, while also calling for the ethical application of behavioral interventions to safeguard consumer autonomy. Ultimately, the future of consumer research lies in interdisciplinary collaboration, leveraging behavioral science to create more realistic, humane, and impactful models of decision-making.
Keywords: Behavioral Economics, Consumer Decision-Making, Cognitive Biases, Heuristics.
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