In recent years, behavioral economics has been founded as a well-respected field of research dealing with the understanding of economic decisions. This research is based on psychologists and sociologists comparing their cognitive models of decision-making under risk and uncertainty to the standard economic models of rational behavior. This comparison has identified and proved that the preferences of individuals when making decisions are inconsistent and can easily be manipulated due to cognitive limits of the brain. These limits result in a series of so called biases that influence our decisions. A large number of biases have been identified and proven in several experimental studies, but the existing research has yet to come up with methods of how to handle these biases, if the individual is to become less prone to manipulation and better at making consistent (and rational) decisions. It is the purpose of this paper to contribute to developing such a method. By introducing a technology that can facilitate an extra reflection in the actual buying situation it is our hypothesis that the individual will be able to make more rational decisions. Based on a review of behavioral economics, we have built an experiment in order to test whether it is actually possible to influence decision makers in the decision situation. In the experiment, we find clear indications that this is possible. By introducing the decision makers to some simple “tips” about the typical pitfalls in the type of decision that they face it is possible to facilitate a deeper reflection. The respondents that were exposed to these “tips” actually show an increase in economic rationality compared to the respondents who answered the same scenario without being exposed to the “tips”. The results of the experiment confirmed the hypothesis, and in order to build a theoretical framework for the decision technology, theories of the biological brain processes and sociological aspects are integrated and compared to theories of behavioral economics. These findings show that the human brain has a tendency of “jumping to conclusions” in order to reduce complexity. This tendency is the result of not reflecting our decisions but rather acting on behalf of habits and previous experiences, hence, it it is one of the main reasons why our decisions are biased. The biology of the brain confirms, that it is essential to find a way of motivating ourselves (and the brain) to reflect in even simple situations if we aspire to avoid falling victim to manipulating asking prices, promotions, artificial expectations of value and so on. Furthermore, the finding shows that social aspects create expectations on different levels, that all influence the individual in decision making due to our latent needs of recognition from our surroundings in order to uphold the different social connections that is the foundation of our individual role in society. These theoretical insights are integrated with the benefits of modern technology which has a lot of influence on most of our lives. Based on the findings of this paper it is our assumption, that the use of dedicated technologies is the most promising way of facilitating continuous change towards more rational (reflected decisions). Conclusively, a practical suggestion of how to deal with our cognitive limitations in everyday decision making is presented.
|Educations||MSc in Psychology, (Graduate Programme) Final Thesis|
|Number of pages||161|