Identify a personal economic decision that was driven by a behavioral bias rather than by pure rational behavior. Given your understanding of behavioral economics, how would your decision differ today?
Rational decision making can be very beneficial in both the business and personal worlds and differs from the behavioral decision making processes in several ways. Business people are faced with decision making every day. Behavioral and rational decision making are the two ways that an individual can approach problem solving. Some people are very aware of feelings or instincts and use them as guides to decision making. These types of feelings are instinctive and rely on intuition and not facts.
Behavior or intuition is the ability to have a grasp on a situation or information without the need for reasoning. In business, people use this type of decision making when facts are unavailable or when decisions are difficult in nature. The second, opposing type of decision making is called rational decision making, which is when individuals use analysis, facts and a step-by-step process to come to a decision. Rational decision making is a precise, analytical process that companies use to come up with a fact-based decision.
My recent decision to purchase a new music system was more behavioral bias than it was rational. Behavioral bias decision is emotionally influenced and in most cases it is not correct. Today I will decide as per economic condition not as per emotions.