Behavioural Economics & Decision Making: Key Insights

By IIC Lakshya

29 Oct 2025

CMA USA

Behavioural Economics & Decision Making: Key Insights

Are you wondering about the significance of learning about behavioral economics? If you are a psychology major, this is a significant topic in your studies. You will learn about patterns of behavior and identify the reasons that humans make irrational decisions. Let us further explore the role of behavioural economics in decision-making.

What is Behavioral Economics?

The concept of psychology, behavioral economics is about the decision-making processes of institutions and individuals. It explores how people react to situations, whether by being emotional or impulsive.

There are, of course, cognitive biases along with irrational decisions that cause human behavior to diverge from economic models and patterns. If you want to pursue courses like Certified Management Accountant (CMA), behavioral economics helps in integrating businesses with profitability analysis, strategic decision-making, and cost efficiency.

Role of Behavioral Economics in Decision Making

Are you wondering about the impact of behavioral economics in decision-making? In business, whether it is operations or marketing, or investment, marketing strategies are quite necessary. The behavioral economics guide to create effective marketing strategies, which helps in predicting consumer and investor behavior.

It is related to normative economics; hence, below are significant roles that will help you gain an in-depth understanding of these professional approaches. You will further learn and develop an understanding of global finance trends and their career impacts.

Game Theory

Behavioral game theory is an emergent class that is applied to behavioral economics, as the theory runs various experiments. It analyses the decisions of the people, accordingly making irrational choices. A decision that leads to error, the heuristics might lead to cognitive bias.

Financial markets

Behavioral economics is quite effective in behavioral and business finance. This helps in evaluating the common patterns where investors often make rash and impulsive decisions when trading the stock and the capital markets. With the implementation of behavioral economics, experts can identify patterns and help stop any future mistakes in decision-making. Furthermore, it plays an important role in emerging finance careers in 2025.

Product Packaging and Distribution

The way a product is packaged, advertised, and distributed across a certain market is dependent on behavioral economics. There are multiple target groups targeted by brands, and they appeal to them using product packaging influenced by strategies made from insights.

Pricing Strategies

Marketing Companies make decisions to set the pricing of their products based on the insights developed from behavioral economics, leading to profitable sales of their products. Behavioral economics is incorporated effectively by organizations, which also contributes to lead generation and an increase in the sales of products and services.

Key Insights for Commerce Students

If you are a Commerce student, there are some key insights that you can develop from behavioral economics. These insights will help you establish various aspects of business marketing, including cognitive, behavioral, and emotional inclinations. They help in developing finance skills, which will help professionals to build strong careers.

Understand Cognitive Biases

When a person gets some information like a term “offer” or “original price”, it makes them rely heavily on it called anchoring. There is another significant aspect of cognitive bias where loss aversion is an integral part of behavioral biases. It means that the pain of loss is more as compared to the pleasure of gaining something, thus working as a greater motivator.

Master Marketing and Pricing Strategies

Behavioral economics is quite important to pricing and marketing strategies to business and social demand. Information is framed in such a way based on the psychology developed from the insights, thus influencing decision-making. Business strategies are developed through insights developed from behavioral economics.

Revenue can be increased by making an expensive option the default option for customer subscription, thus mastering marketing strategies. Another insight developed from behavioral economics is creating an urgency in the decision-making process of a consumer with tactics like “last day to buy”, thus increasing sales.

Use Experimental Research

The psychological field of behavioral economics highlights specific factors like implementing strategies that will contribute to decision making thus, contradicting traditional models. For example, Artificial Intelligence (AI) will impact the commerce and the finance industry.

This is how professionals can develop deeper insights into the commercial and financial aspects with the implementation of empirical research. Accordingly, professionals learn AI integration with the finance and accounting industries.

Apply to Management and Finance

Did you know behavioral economics can actually help professionals improve their workplace productivity, as it helps in understanding the decisions made by employees? Factors such as confidence and social proof help in working towards an established productivity through strategic planning.

Furthermore, the financial decisions taken based on impulse and emotions are replaced by effective steps taken for both managers and consumers. Successful businesses can be developed effectively with the integration of behavioral economics.

Why is it Important for a Professional Career?

Behavioral economics is significantly important and plays a strategic role in a professional career. The insights that students get from this psychological field lead to an advantage as businesses can understand and implement them to create effective marketing campaigns, optimize pricing strategies and design better products.

Decision-making is enhanced as future professionals can implement insights leading to an increased influence. Businesses can make financial decisions effectively, leading to successful growth. There is enhanced decision-making as it also influences ethical aspects, thus guiding consumer behavior.

Wrapping Up!

In conclusion, there are valuable insights developed from behavioral economics, thus offering a realistic understanding of marketing strategies. How it influences business decisions and contributes to overall growth and improved workplace dynamics.

Frequently Asked Questions (FAQs) on Behavior Economics

What is “loss aversion” and why is it important?

The theory of people feeling the pain of losing which is significantly more important compared to the pleasure of gaining something of the same value is called “loss aversion”. It is important because it leads to risk-avoidance behavior in decision making. Often investors refuse to sell their stock at a loss even when it's rational.

What role does social influence play in decision-making?

There is a theory called herd behavior where people often look to other people before taking a step or making a decision. Hence, social influences play a significant role in decision making as high ratings or product reviews that are currently social monitor for behavior are used before any new decision.

How can governments use behavioral economics?

Governments often apply behavioral economics by using “nudge units” to public policy. For example, they use default enrollment systems by boosting organ donation.

What is the difference between system 1 and system 2 thinking?

Daniel Kahneman made this concept popular, which discusses the two modes of thought. Where system 1 is emotional, intuitive, and fast. While the second mode, system 2, is logical, analytical, and slow. In behavioral economics studies, most often System 1 dominates, which might lead to impulsive and biased decisions.

How does behavioral economics affect investment decisions?

At the time of investing, investors are influenced by a lot of factors, including high returns or market drops. This leads to them making decisions that are either emotional or biased. This is where behavioral economics comes in, as it affects the investment decisions by identifying patterns and correcting them.