Emotions, Mood and Decision Making

Literature Review

According to Rabin (1998), “because psychology systematically explores human judgment, behavior, and well-being, it can teach us important facts about how humans differ from the way they are traditionally described by economists.” (p. 11) According to Kahneman (2003), economists often criticize the research of psychologists because of their biases and errors, even though the economical rational agent models are psychologically unrealistic.

Rick and Loewenstein (2008) define behavioural economics as “a subdiscipline of economics that incorporates more psychologically realistic assumptions to increase the explanatory and predictive power of economic theory. The field first achieved prominence in the 1980s and has been gaining influence since then.” (p. 139)