Published Online:October 2025
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP161025
DOI:10.71329/IUPJARAP/2025.24.4.306-323
Author Name:Vishnu Vandana Vemuri and Balaji Utla
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:306-323
The paper explores the application of behavioral economics and finance principles to consumer decision-making, focusing on how psychological factors extend beyond rational calculations and impact consumer choices. It examines the influence of psychological biases, such as overconfidence, endowment effect, loss aversion, and social proof, on consumer behavior. A survey was administered to 75 respondents of varied backgrounds to collect data on the purchase behavior and effect of cognitive biases. Regression technique and ANOVA were applied to study the impact of various biases on their confidence in their decision making. The results revealed that gender significantly impacts confidence in decision making, with differences observed between male and female consumers. Loss aversion and overconfidence biases were found to significantly influence decision-making confidence, with more loss-averse individuals and those with higher levels of overconfidence showing greater certainty in their decisions. The findings can help in developing effective strategies by deepening the understanding of consumer psychology and the biases that shape decision making
Behavioral economics and behavioral finance represent critical fields that merge insights from psychology with economic and financial theory. They challenge the traditional view that individuals always act rationally, making decisions purely based on logic and self-interest. Instead, these fields suggest that human behavior is influenced by psychological factors, emotions and social dynamics, often leading to decisions that deviate from what would be predicted by standard economic models.