Keywords
Abstract
This study explores the impact of cognitive biases on the decision-making process of consumers using behavioural economics and cognitive psychology frameworks. Based on dual-process theory, we focus on three main domains of decision bias: value evaluation biases (anchoring, framing effects, loss aversion), option evaluation biases (status quo bias, availability heuristic), and temporal judgment biases (hyperbolic discounting, projection bias). The meta-analysis of 83 studies on retail pricing reveals pervasive anchoring effects across product types (Cohen's d = 0.62-0.89) while field studies show framing of the same options differently leading to preference reversals in 38-54% of subjects. Asymmetric price demand response illustrates loss aversion, where demand declines 2.4 times more for price increases than increases for equivalent price drops. Certain biases are accentuated in online environments as more debiasing opportunities arise while environments amplify others, shown with selection rates for default settings seeing increases of 65-428% across e-commerce sites. Comparisons across 42 nations show significant divergence in the expression of bias where collectivist cultures displayed 1.4 times greater loss aversion than individualist cultures. With this evidence, traditional models of utility maximisation need refinement with the addition of heuristics and biases for marketplace analysis models if they are to effectively predict behaviour.