This review looks at the development of decision science and behavioral economics, tracing the chronological progression of these disciplines and their symbiotic fusion in elucidating our comprehension of economic choices. It starts by discussing the limitations of traditional economic theories that assume rational and profit-maximizing behavior, highlighting the need for a more empirically anchored approach. The paper traces the development of decision theory amidst uncertainty, beginning with Blaise Pascal's notion of expected value, progressing to Daniel Bernoulli's expected utility, and later formalized by John von Neumann and Oskar Morgenstern. This journey culminates in the contributions of Daniel Kahneman and Amos Tversky, who introduced the concept of subjective expected utility. The paper acknowledges the inclusion of uncertainty surrounding delayed payoffs and discusses the role of cognitive biases and heuristics—mental shortcuts—in decision-making, showing how they affect our economic choices. The authors also show how these insights have been used in real-world settings, such as nudging, a technique used to subtly guide one’s behavior.

Received 02 June 2023. Revised 14 June 2023. Accepted 19 June 2023. Published online 31 July 2023

Behavioral economics, Decision science, Prospect theory, Cognitive biases, Nudge theory,

http://dx.doi.org/10.26106/s3p5-z506