Module:                    Behavioural Insights (BM3028)

Academic Year:       September 2022

Semester:                 Three

Program of Study:   BA (Hons) Business Administration 

Task:

Summarise a minimum of ten studies on decision-making, for example on heuristics and biases such as prospect theory and loss aversion.

1           Introduction

The examination of decision-making encompasses a diverse array of theoretical perspectives. Normative theories centre their attention on the pursuit of optimal decision-making strategies, achieved by deducing algebraic models of preferences from theoretical constructs of idealized behaviour. In contrast, descriptive theories embrace these algebraic models while also assimilating the recognized constraints inherent in human behaviour.

Meanwhile, computational approaches embark on an alternative trajectory, departing from distinct foundational assumptions. These approaches delve into the intricate realm of cognitive and emotional substrates that underlie the intricate process of selecting one choice over another.

This comprehensive analysis undertakes the task of meticulously scrutinizing and juxtaposing these three paradigms. It delves into their distinct theoretical underpinnings while also discerning their capacity to effectively encompass behavioural patterns and neurophysiological insights, gleaned from empirical research experiments. In essence, this review artfully encapsulates and elucidates these multifaceted approaches, both in terms of their conceptual frameworks and their aptitude to encapsulate the intricate interplay between theory and empirical observation.

The provided report offers a succinct and coherent overview of a compilation of ten studies cantered around the subject of decision-making, coupled with a comparison to the Behavioural Economic Model (BEM) and the Neoclassical Model (NM).

The primary purpose of these summarized studies is to dissect the intricacies of heuristics and biases as they pertain to decision-making processes. This endeavour involves a meticulous review of existing literature that revolves around heuristics and the act of decision-making itself. Through a meticulous examination of research encompassing key factors like prospect theory, loss aversion, and various cognitive biases, the resultant insights shed light on the intricate mechanisms that underpin human decision-making.

This profound understanding contributes significantly to unravelling the intricate tapestry of how individuals navigate the evaluation of risks, appraise potential outcomes, and ultimately arrive at choices. The amalgamation of these research findings creates a mosaic that illuminates the subtle interplay between cognitive processes, psychological influences, and external dynamics that fundamentally shape decision-making behaviours.

The culmination of this effort yields practical implications that reverberate across diverse disciplines, spanning from the realms of economics and psychology to the strategic landscapes of policy formulation and business manoeuvring. In these spheres, where the potency of well-informed decisions remains paramount for the achievement of desired objectives, the assimilation of this profound comprehension holds the potential to markedly elevate the quality of decision-making.

This report is structured into three distinct sections. The initial section serves as an introduction, acquainting readers with the core concepts, theories, and the overarching purpose of the report. The subsequent segment delves into a comprehensive overview of the ten studies cantered around decision-making, heuristics, and biases.

This encompasses an exploration of significant theories such as prospect theory and loss aversion. Each study’s encapsulation comprises its title, authorship, a condensed summary of findings, and an elucidation of the employed research methodology. Moving forward, the report proceeds to scrutinize and contrast the outcomes of each individual study with the Neoclassical Model (NM) or the Behavioural Economic Model (BEM).

This evaluative step discerns which theoretical model, if any, aligns most harmoniously with the study’s results. Additionally, each study’s implications for governmental bodies or organisations are elucidated. This involves dissecting how the findings hold relevance for these entities and delving into potential recommendations that emerge from the research insights. In essence, the report is structured to progressively immerse readers in a comprehensive exploration of the aforementioned dimensions, culminating in a holistic understanding of decision-making, its nuances, and its applicability to practical contexts.

2           Summary of ten Studies on Decision Making

2.1         Study 1:

Authors: Hasan, M. and Mustafa, S.

Title: Prospect theory and investment decision biases: the mediating role of risk perception: case study of Pakistan stock exchange. 

2.1.1        Research Summary

Hasan and Mustafa’s 2023 study aims to investigate the intricate interplay between prospect theory, biases inherent in investment selection, and risk perception within the perspective of the Pakistan stock exchange. The researchers delve into the influence of risk perception on individuals’ speculation choices and endeavour to ascertain whether prospect theory can elucidate the biases evident in these decisions.

2.1.2        Methodological Approach

The researchers collected data through a quantitative research strategy, employing a survey questionnaire administered to investors participating in the Pakistan stock exchange. The survey encompassed inquiries about demographic details, biases in investment choices, and metrics of risk perception. Subsequently, statistical methods like correlation analysis and regression analysis were utilized to scrutinize the relationships among these variables.

2.1.3        Key Findings

The study’s findings underscore a nexus between prospect theory and the biases shaping investment decision-making, a nexus modulated by the factor of risk perception. The researchers observed that individuals who hold a heightened perception of risk tend to exhibit more pronounced biases in their financial choices. Among these biases are overconfidence, the disposition effect, and loss aversion. Notably, the study illuminates that prospect theory outperforms the neoclassical model in providing a more comprehensive rationale for these biases.

2.1.4        Comparison with Behavioural Economic Model (BEM) or Neoclassical Model (NM)

In contrast to the neoclassical framework, the study’s outcomes lend credence to the propositions of prospect theory. This theory posits that individuals’ decisions are influenced by their perception of risk as well as their personalized assessments of gains and losses. In contradistinction, the neoclassical model rests on the assumption of rational decision-making guided by anticipated utility theory. The study’s conclusions align with prior research that has unveiled the limitations of the neoclassical model in comprehending decision-making within a context of uncertainty.

2.1.5        Recommendations and Implications for Policy

The implications of this study hold significant ramifications for governmental bodies and financial institutions. Policymakers are urged to formulate regulations and directives that foster well-informed and judicious investment choices by taking into account the profound impact of risk perception and investment decision biases.

For instance, mitigating biases and augmenting decision-making competence could be achieved through the provision of precise and transparent information regarding risks and potential rewards. Moreover, financial establishments have the opportunity to furnish educational resources and programs aimed at cultivating investors’ acumen in risk assessment and decision-making prowess.

2.2         Study 2:

Authors: BORAH, A.J. and BHOWAL, A.

Title: Unravelling the Intricacies of Behavioural Biases: Exploring their Profound Influence on Working Capital Management Strategies of Entrepreneurs.

2.2.1        Summary of the research

The goal of the study by Borah and Bhowal (2023) was to look at the influence of behavioural preferences on entrepreneurs’ working capital executives practices. In the background of working capital management, the researchers investigate how cognitive and emotional aspects influence decision-making. They look at how biases like overconfidence, loss aversion, and anchoring affect the financial choices made by business owners.

2.2.2        Results

For their investigation, the researchers collected data using a quantitative research approach. They acquired primary data by giving a sample of company owners a structured questionnaire survey. Working capital management strategies and behavioural biases were included in the questionnaire. Working capital management practices and behavioural biases were correlated using regression analysis and other statistical techniques to examine the data.

2.2.3        Methodology

The findings of the study demonstrate that behavioural biases significantly affect how organisations manage their working capital. In particular, the researchers found that overconfidence leads to a larger degree of investment whereas loss aversion resulted in a more cautious approach to managing working capital. Furthermore, it was demonstrated that anchoring biases affected the choices made by entrepreneurs, leading to inadequate working capital management strategies.

2.2.4        Findings

The results of this study are more in line with the Behavioural Economic Model (BEM) when compared to other studies. This study’s findings about the effect of behavioural biases are consistent with the BEM’s emphasis on the importance of cognitive and emotional elements in decision-making.

2.2.5        Recommendations and Policy Implications

The results of this study have substantial policy implications and suggestions for both organisations and governments. Governments can create rules and regulations that take into consideration how behavioural biases affect the choices made by entrepreneurs. Organisations may create measures to lessen the harmful impacts of biases on working capital management by understanding how they affect it. It is advised that business owners acquire training and instruction on behavioural biases to help them make better decisions and practice better working capital management.

2.3           Study 3

Authors: Maradona, A.F.

Title: A Qualitative Exploration of Heuristics and Cognitive Biases in Auditor Judgements. 

2.3.1        Research Synopsis

Summary of the Work Done in Research The purpose of the study is to investigate cognitive biases and heuristics that affect auditor judgements. It uses ethnomethodology as a research strategy and a qualitative research design. In-depth semi-controlled interrogates with 15 auditors from a public accounting company were used to gather the data. Starting to conclusions, groupthink, representativeness, accessibility, and fastening biases are five of the biases that auditors may encounter, according to the research. in 2020 (Maradona).

2.3.2        Methodological Approach

The study uses ethnomethodology as a research strategy and a qualitative research design as its technique. In-depth semi-structured interviews with 15 auditors from a public accounting company were used to gather the data. The purpose of the interviews was to investigate the cognitive biases and heuristics that affect auditor assessments (Maradona, 2020).

2.3.3        Results

The research reveals five categories of prejudice that auditors may experience: anchoring, leaping to conclusions, groupthink, representativeness, and availability biases. The representativeness empirical, the convenience heuristic, the modification and anchoring heuristic, and the impact heuristic are only a few of the heuristics that lead to the emergence of these biases. According to the findings, heuristics employed by individual auditors in their decision-making processes might lead to biases in auditor assessments (Maradona, 2020).

2.3.4        Findings

Behavioural economic model (BEM) and the neoclassical model (NM) comparison: The study’s results support the Behavioural Economic Model’s (BEM) expectations. Heuristics may result in biases in individual assessments, according to the BEM. The discovery of biases resulting from various heuristics in the study lends credence to the BEM’s viewpoint on the impact of heuristics on biases in auditor judgements (Maradona, 2020).

2.3.5        Recommendations and Policy Implications

The study’s conclusions have policy ramifications for governments and organisations involved in auditing. The discovery of heuristics and biases in auditor judgements emphasizes the necessity for auditors to be conscious of these cognitive biases and to create plans to lessen their effects. To increase auditors’ understanding of cognitive biases and encourage professional scepticism, governments and organisations might create training programs, give resources, and provide training materials. This can result in audit judgements that are more accurate and trustworthy, which lowers the risk of biases and mistakes throughout the auditing process.

2.4         Study 4

Authors: Gonzalez-Ramirez, J., Arora, P. and Podesta, G.

Title: Using insights from prospect theory to enhance sustainable decision making by agribusinesses in Argentina. 

2.4.1        Summary

Gonzalez-Ramirez et al.’s (2018) study sought to improve sustainable decision-making by farming industry in Argentina by using lessons from prospect theory. The researchers acknowledged that conventional economic models, such as the Behavioural Economic Model (BEM) and the Neoclassical Model (NM), may fall short in their capacity to properly explain decision-making in the context of sustainability. Because prospect theory offers a narrative model of decision building under risk, they went to it as a result.

2.4.2        Methodology

The researchers combined qualitative interviews with quantitative surveys as part of a mixed-methods strategy. To discover more regarding the decision-making processes and variables affecting decisions on sustainability, they interviewed agricultural managers. Then, using principles from prospect theory, they created a survey questionnaire that was sent to a broader sample of agribusinesses in Argentina.

2.4.3        Findings

According to the study, Argentina’s agribusinesses displayed prospect theory-consistent decision-making behaviours. This included risk quest for profits and peril aversion for losses of low possibility, as well as overweighting of low likelihoods, peril aversion for gains and risk strive for losses of high probabilities.

These results imply that Argentina’s agricultural enterprises could diverge from the expectations of the Behavioural Economic Model and the Neoclassical Model. Behavioural economic model and the neoclassical model are compared: Instead of the Neoclassical Model or the Behavioural Economic Model, the study’s findings are more in line with the expectations of prospect theory.

The overweighting of low probability and the risk attitudes shown in the decision-making of agribusinesses in Argentina are explained by prospect theory. The Behavioural Economic Model focuses on departures from rationality without explicitly taking into account the unique risk attitudes found in the study, in contrast to the Neoclassical Model, which presupposes rational decision-making based on complete knowledge and utility maximization.

2.4.4        Policy repercussions

The results of this study have significant repercussions for governments and organisations engaged in sustainability and agriculture. Policymakers may create targeted interventions and incentives to encourage sustainable practices by having a better understanding of the decision-making processes of agribusinesses. Prospect theory insights can guide decision-making procedures and tactics for agribusinesses to improve sustainability. The study suggests that while making sustainable decisions, agribusinesses in Argentina take into account the biases and risk attitudes found in prospect theory.

2.5         Study 5

Authors: Kimani, M.C.

Title: Prospect theory: evidence of over-reaction in investor decision making at the Nairobi stock exchange.

2.5.1        Summary of the study

The goal of Kimani, M.C., (2018)’s study was to look at how investors at the Nairobi Securities Exchange in Kenya made decisions and how framing and loss aversion affected those decisions. The researchers concentrated on prospect theory, which offers an alternative to the neoclassical paradigm of risk-averse decision-making. Prospect theory contends that people consider probable gains and losses in relation to a reference point and that they behave risk aversely when considering gains and aggressively when considering losses.

2.5.2        Methodological Approach

The researchers gathered information via a survey questionnaire that was given to investors at the Nairobi Securities Exchange. The questionnaire contained hypothetical situations that altered how investment alternatives were presented and evaluated participants’ risk preferences. To find out how framing and loss aversion affect investors’ decision-making, data from the study was evaluated statistically.

2.5.3        Findings

The study discovered that loss aversion and framing had a big impact on how investors made decisions. Investors displayed risk aversion when given with investment alternatives portrayed as rewards. Investors behaved risk-takingly when the options were presented as losses, nevertheless. This result is consistent with the prospect theory’s predictions that individuals are more susceptible to losses than benefits and are trained to accept bigger risks in order to prevent losses.

2.5.4        Comparison with the Behavioural Economic Model (BEM) or Neoclassical Model (NM)

Instead of the neoclassical model, the results of this investigation confirm the expectations of prospect theory. The anticipated utility hypothesis, which recommends that people assess alternatives based on their expected consequences and probabilities, is the foundation of the neoclassical paradigm, which presupposes that people make logical judgments. Prospect theory, on the other hand, contends that how people frame their alternatives and their aversion to loss have an impact on how they make decisions. Prospect theory is supported by the study’s findings, which show that investors demonstrated risk aversion for profits and risk-seeking behaviour for losses.

2.5.5        Recommendations and Policy Implications

The results of this study have substantial policy implications and recommendations for governments and organisations that are active in the financial markets. Policymakers may create policies and rules that encourage more informed and logical investment decisions by having a better understanding of how framing and loss aversion affect investors’ decision-making.

For instance, authorities might lessen the impact of framing effects by giving investors fair, unambiguous information. Financial institutions can also provide investors with risk management resources and training to enable them to make better informed decisions. Largely, the study highlights how crucial it is to take behavioural aspects into explanation when developing financial sector rules and actions.

2.6         Study 6

Authors: Khan, M.U.

Title: Impact of availability bias and loss aversion bias on investment decision making, moderating role of risk perception. 

2.6.1        Summary of the investigation

With an emphasis on the moderating function of risk perception, Khan’s study from 2017 explores the effects of convenience bias and loss aversion bias on stock decision-making. The goal of the study is to comprehend how these biases affect investing choices and whether or not risk perception plays a part in reducing or enhancing their impact.

2.6.2        Methodology/Methods used

The study uses a quantitative study model and a survey questionnaire to collect data. Measures of availability bias, risk perception,  loss aversion bias, and investment decision-making are all included in the questionnaire. The associations between the variables are then looked at by analysing the data using statistical methods like regression analysis.

2.6.3        Findings

According to the study’s conclusions, availability prejudice and loss aversion bias both have a big influence on how people make investment decisions. Investment decisions are prejudiced as a result of availability bias, which is the propensity to depend on information that is easily accessible. Loss aversion bias, or the propensity to avoid losses more than to acquire profits, is another factor that affects investing choices.

The study also discovers that the association linking these biases and investing decision-making is moderated by risk observation. The influence of availability bias and loss aversion bias on investment decisions is lessened by higher risk perception.

2.6.4        Comparison with the BEM or NM

Instead of the Neoclassical Model (NM), the results of this study are more consistent with the Behavioural Economic Model (BEM). The Behavioural Economic Model acknowledges the impact of biases and heuristics on decision making, in contrast to the Neoclassical Model’s assumption of rational decision making based on anticipated utility theory. The study’s findings are consistent with the tenets of the Behavioural Economic Model (Tversky & Kahneman, 1974) in that they suggest that biases like availability bias and loss aversion bias play a substantial influence in investment decision-making.

2.6.5        Recommendations and Policy Implications

The results of this study have substantial policy implications and suggestions for governments and organisations that make investment decisions. It first emphasizes the need for greater knowledge of biases and how they affect investing choices.

Investors who are aware about these biases can make more intelligent and logical financial decisions. Second, the study contends that biases’ negative impacts on investing decisions can be mitigated by risk perception. In order to improve investors’ perceptions of risk, companies and politicians should concentrate on measures like giving lucid and accessible information regarding investment hazards. Finally, the study stresses the significance of taking behavioural aspects into consideration when making investment decisions and supports the creation of frameworks and regulations that take these biases into account.

2.7         Study 7

Authors: Ebrahimigharehbaghi, S., Qian, Q.K., de Vries, G. and Visscher, H.J.

Title: Application of cumulative prospect theory in understanding energy retrofit decision: A study of homeowners in the Netherlands. 

2.7.1        Summary of the study that was done

In order to comprehend how Dutch homeowners make decisions about energy retrofitting, Ebrahimigharehbaghi et al. (2022) undertook research. To evaluate homeowners’ decision-making behaviour and pinpoint the variables impacting their decisions, the researchers used the cumulative prospect theory (CPT).

Methodology/Approach Employed

The researchers collected data by orchestrating an online survey targeted at Dutch homeowners. This comprehensive questionnaire delved into participants’ viewpoints on energy retrofitting, their preferences, and the underlying mechanisms guiding their decision-making. To scrutinize the amassed data, the researchers harnessed the analytical framework of cumulative prospect theory.

2.7.2        Findings

The study’s revelations unveiled a multifaceted web of influences that guided homeowners’ determinations regarding energy efficiency enhancements. Financial considerations, ecological concerns, and the pressure exerted by societal norms emerged as the triumvirate of decisive factors significantly shaping homeowners’ choices.

Notably, homeowners exhibited a distinctive stance on potential gains and losses, with the latter bearing a more profound impact on their decisional processes. Intriguingly, the study uncovered a propensity among homeowners to overinflate the likelihood of rare occurrences, a behavioural aspect potentially accounting for their preference towards energy retrofitting.

2.7.3        Alignment with NM and BEM

In contrast to the latter, the findings of this study harmonize more closely with the Behavioural Economic Model (BEM) and Neoclassical Model (NM). The research underscores the influence of psychological traits, for instance, loss aversion and a predisposition to embrace minimal risks, on homeowners’ determinations. The Neoclassical Model, premised on a rationale of deliberate decision-making grounded in expected utility theory, correlates with the observed outcomes.

2.7.4        Policy Implications and Consequences

The study’s insights reverberate with noteworthy policy implications for governmental entities and organisations championing the cause of energy retrofitting. Policymakers stand to benefit from cultivating a heightened comprehension of the myriad dynamics influencing homeowners’ choices, thereby facilitating the formulation of impactful interventions and incentives to encourage energy-efficient practices.

The study’s findings advocate for the potency of fiscal incentives, environmental consciousness campaigns, and societal pressures in galvanizing households to embrace energy-saving methodologies. The integration of these factors into the framework of regulatory strategies and initiatives aimed at fostering sustainable energy utilization is thus crucial.

2.8         Study 8

Authors: Goyal, P., Gupta, P. and Yadav, V.

Title: Decoding the importance of herding and prospect theory for Indian millennial investors. 

2.8.1        Study Synopsis

The research conducted by Goyal, Gupta, and Yadav (2023) aimed to delve into the precursor role of prospect theory and herding in relation to heuristics within the context of Indian millennial investors. This investigation involved the collection of survey data from a sample of 923 millennials in India, with a specific focus on their engagement with mutual funds and equities. The researchers employed regression analysis as the analytical tool for their study.

2.8.2        Methodological Approach

Employing a quantitative research framework, the researchers utilized questionnaires as the means of data collection for their study. To dissect the intricate interplay between herding behaviour, prospect theory, and heuristics among Indian millennial investors, regression analysis was employed as the statistical methodology.

2.8.3        Key Findings

The study’s outcomes substantiated the hypothesis that herding behaviour and prospect theory serve as foundational elements shaping heuristics among Indian millennial investors. However, the impact of these factors exhibited distinct variations when considering investments in shares versus mutual funds.

2.8.4        Alignment with BEM or NM

The findings of this study find greater congruence with the Behavioural Economic Model (BEM) in comparison to the Neoclassical Model (NM). The Behavioural Economic Model accommodates psychological biases and deviations from rationality within its framework, while the Neoclassical Model predicates rational decision-making on the principles of expected utility theory.

The study’s conclusions, which accentuate the significance of herding behaviour and prospect theory in influencing heuristics, underscore the substantial role that behavioural attributes play in shaping the investment choices of Indian millennial investors.

2.8.5        Policy Implications and Recommendations

The study’s implications reverberate with substantial policy ramifications for governmental bodies and entities engaged in investment management and financial oversight. Policymakers can leverage a more nuanced comprehension of the interplay between herding behaviour and prospect theory to devise interventions and training initiatives that counteract the adverse effects of heuristics on investment decision-making.

For instance, enhancing investors’ awareness of potential biases like prospect theory and herding could facilitate more informed and rational investment decisions. Furthermore, financial institutions can harness these insights to refine their product offerings and communication strategies, effectively catering to the unique requirements and preferences of millennial investors.

2.9         Study 9

Authors: Zhao, M., Shen, X., Liao, H. and Cai, M.

Title: Selecting products through text reviews: An MCDM method incorporating personalized heuristic judgments in the prospect theory. 

2.9.1        Summary of the investigation

The selection of items using text reviews is the main topic of the study done by Zhao et al. in 2022. A multi-criteria decision-making (MCDM) approach that integrates unique heuristic judgements based on the prospect theory is proposed by the researchers. A behavioural economic model that defines how individuals make choices in the face of vagueness is called the prospect theory. By taking into account the arbitrary tastes and biases of customers, the researchers hope to increase the accuracy of product selection.

2.9.2        Methods and Approaches

The study is based on the secondary analysis, following the creation of a decision matrix, the researchers used the MCDM technique to rank the goods according to the unique heuristic evaluations. The reference point, loss aversion, and subjective value functions were taken into account while modelling the decision-making process using the prospect theory.

2.9.3        Findings

The study’s conclusions show that the prospect theory is more accurate at choosing products when individualized heuristic evaluations are included. The MCDM technique successfully accounts for subjective preferences and biases, enabling a more thorough analysis of items based on text reviews. The customized heuristic judgements take into account elements that are frequently disregarded in conventional decision-making models, such as reference points, loss aversion, and subjective value functions.

2.9.4        Behavioural economic model (BEM) and the neoclassical model (NM) comparison:

The Behavioural Economic Model (BEM) and not the Neoclassical Model (NM) best describe the study’s findings, respectively. The BEM acknowledges that irrational preferences, biases, and heuristics have an impact on people’s decision-making processes.

The NM, in contrast, bases its assumptions on the rational decision-making process on objective data and utility maximization. Personalized heuristic judgements are incorporated into the prospect theory to represent the behavioural components of decision-making that the NM does not sufficiently capture.

2.9.5        Recommendations and Policy Implications

The results of this study have substantial policy ramifications and policy suggestions for governments and organisations involved in product recommendation and selection systems. Decision-makers may more effectively comprehend and take into account the subjective preferences and biases of customers by incorporating individualized heuristic assessments into the prospect theory.

As a result, customers may receive more precise and customized product suggestions, increasing their pleasure and loyalty. Additionally, businesses may utilize the findings from this study to enhance their text review analysis algorithms and create better tools for product decision-making.

2.10     Study 10

Authors: Gonzalez-Ramirez, J., Arora, P. and Podesta, G.,

Title: Using insights from prospect theory to enhance sustainable decision making by agribusinesses in Argentina. 

2.10.1    Summary of Findings

Gonzalez-Ramirez, Arora, and Podesta’s (2018) study aimed to explore the applicability of prospect theory in enhancing sustainable decision-making among Argentine agribusinesses. They found limitations in both the Neoclassical Model (NM) and the Behavioural Economic Model (BEM) in comprehending decision-making behaviours in risky contexts. To address these limitations, the researchers suggested utilizing prospect theory as an alternative framework.

2.10.2    Methodological Approach

The study employed a qualitative methodology, conducting in-depth interviews with agricultural managers in Argentina. These interviews delved into managers’ decision-making processes, attitudes towards risk, and considerations of sustainability.  Thematic analysis was utilized to identify patterns and themes in the interview data related to decision-making and sustainability for assignment help visit

2.10.3    Key

Findings

The study’s findings brought forth novel insights into the intersection of agricultural decision-making and sustainability. Consistent with prospect theory patterns, the managers displayed risk aversion for returns and risk-seeking behaviour for deficits with high probabilities.

Additionally, the managers presented an inclination to overvalue low probabilities, leading to an increased attraction to both insurance and gambling. The study also revealed the presence of the certainty effect, where individuals tend to be risk-averse when realizing certain gains and risk-seeking when dealing with known losses. The isolation effect, causing varied preferences when choices are presented differently, was also observed.

2.10.4    Comparison with Behavioural Economic Model and Neoclassical Model

The study’s conclusions align more closely with the predictions of prospect theory compared to the Neoclassical Model (NM) and the Behavioural Economic Model (BEM). Prospect theory offers a comprehensive explanation of decision-making under risk, accounting for phenomena such as the certainty effect, overvaluation of low possibilities, risk-seeking for defeats, and risk aversion for profits contact assignment writer

2.10.5    Policy Implications

The study’s implications extend to governmental bodies and agricultural organisations. Policymakers should consider the biases and tendencies revealed in prospect theory while designing interventions and regulations to promote sustainable decision-making in agribusinesses.

Understanding the overweighting of low probabilities could inform the creation of risk management strategies, acknowledging the allure of insurance and gambling. Policymakers should also account for the impacts of the certainty effect and the isolation effect on decision-making processes. Additionally, agricultural businesses can benefit from integrating prospect theory insights into their managerial training and decision-making frameworks. This integration could enhance their ability to navigate the complexities of risk and uncertainty in the industry, facilitating more sustainable choices.

3           Conclusions and Recommendations

The portfolio report comprised on in-depth examination and comparison of different paradigms on decision making. It examines their various theoretical foundations and assesses how well they can account for behavioural trends and neurophysiological insights discovered via empirical research studies. Essentially, this analysis skilfully captures and explains these multiple methods, both in terms of their conceptual frameworks and their capacity to capture the complex interaction between theory and actual observation.

For governments and other decision-making institutions, the findings of various research have implications for policy. The identification of heuristics and cognitive biases in auditor decisions highpoints the need for assessors to be conscious of the biases and develop strategies to moderate their impact. Governments and organisations may develop training programs, allocate resources, and offer training materials to improve auditors’ awareness of cognitive biases and promote professional scepticism. This can lead to more accurate and reliable audit judgments, which reduces the possibility of biases and errors throughout the auditing process.

Governments and organisations involved in agriculture and sustainability must assess the implications of the findings of another research. By having a greater knowledge of how agribusinesses make decisions, policymakers may develop targeted interventions and incentives to promote sustainable practices. Insights from prospect theory can direct agribusinesses’ decision-making processes and strategies to increase sustainability. According to the study, agribusinesses in Argentina use prospect theory’s biases and risk attitudes while making sustainable decisions.

For governments and organisations involved in the financial markets, the findings of one of the studies contained in the report have significant policy ramifications. By having a greater knowledge of how framing and loss aversion impact investors’ decision-making, policymakers may develop laws and regulations that encourage more informed and rational investing decisions. For instance, by providing investors with accurate, lucid information, authorities can decrease the influence of framing effects. To help investors make smarter judgments, financial institutions can also provide them training and tools in risk management. Overall, the study shows how important it is to include behavioural factors when creating regulations and actions for the financial industry.

In conclusion, this complete report aimed to provide an in-depth assessment and comparison of decision-making, for example, on heuristics and biases such as prospect theory and loss aversion paradigms. It investigated their varied theoretical foundations and analyses their ability to account for behavioural patterns and neurophysiological insights obtained via empirical research projects. Essentially, this portfolio report captured and explained these various methodologies in terms of their conceptual frameworks as well as their ability to represent the intricate relationship between theory and real observation.

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5           Appendices

Figure 1: Prospect Theory and Loss Aversion

Source: Marandici (2022)

Figure 2: An illustration for Decision-making

Source: Lude and Prügl (2019)