Which field studies how psychological factors influence economic decision-making?

Behavioral economics is the field that examines how psychological factors impact economic decision-making. It integrates insights from psychology with economic theory to understand how people actually behave in economic contexts, as opposed to how they would behave if they were fully rational agents.

This discipline focuses on concepts such as biases, heuristics, and emotions that often lead individuals to make decisions that deviate from what traditional economic theories would predict, which typically assume rational behavior. For instance, behavioral economics explores phenomena like loss aversion, where people prefer to avoid losses more than acquiring equivalent gains, influencing their financial choices.

The other options represent different but related fields. Behavioral finance, while closely linked, specifically focuses on psychological influences on financial markets and investment behaviors rather than broader economic decision-making. Traditional economics generally relies on the assumption of rational behavior and does not incorporate psychological factors. Cognitive economics, on the other hand, examines how cognitive processes such as perception and memory affect economic behaviors, but it does not specifically emphasize psychological influences in the way behavioral economics does. Thus, behavioral economics is the most comprehensive answer for studying the intersection of psychology and economic decision-making.