Behavioural Economics and Consumer Decision-Making: A Study of Financial Products

Abstract

The influence of behavioural economics on consumer decision-making in relation to financial goods is examined in this study article. Conventional economic models assume that customers make logical decisions, but in reality, cognitive biases often cause consumers to make poor financial decisions. The study looks at major biases that affect choices on mortgages, investments, insurance, and savings, including present bias, overconfidence, and loss aversion. Through an examination of the interface between psychology and economics, the research emphasises how these prejudices impact consumer conduct, often resulting in illogical financial choices. The article also explores how financial institutions may utilise behavioural insights to create more successful products and services, and how policymakers can use these results to help consumers make better financial decisions and become more financially literate. In an increasingly complicated financial environment, the study attempts to provide a thorough knowledge of the role behavioural economics plays in financial decision-making and provides suggestions for encouraging better informed and advantageous consumer choices.