Abstract:

Economists first approached decision-making processes in their efforts to determine how to choose the most profitable alternative in an economic setting. Recent efforts of bridging together economics and psychology emphasized that while economics should further develop as the science of how resources are allocated by individuals and collective organizations like firms and markets, it is necessary that the psychology of individual behavior underlies and informs economics, much as neuroscience has informed cognitive psychology in the past thirty years or so. Behavioral economics, a recently developed interdisciplinary field, can be epistemologically distinguished from other social sciences by its emphasis on formal and psychologically informed explanation of field data. The present review will outline the effects of emotion and individual differences on decision-making and it will hopefully serve as an introduction to contemporary behavioral economics.

Keywords: decision-making, behavioral economics, emotions, personality