Beyond Rational Choice : A Generative AI Framework for Modelling Cognitive Biases in Economic Decision Making

Gaurika Bhatia; Nishanr Kumar Singh

doi:10.36948/ijfmr.2026.v08i03.76338

Beyond Rational Choice : A Generative AI Framework for Modelling Cognitive Biases in Economic Decision Making

Author(s)	Ms. Gaurika Bhatia, Dr. Nishanr Kumar Singh
Country	India
Abstract	When faced with uncertainty, people often diverge from traditional rational-choice theory due to bias-induced cognition and reasoning. Behavioural economics literature reveals that individuals frequently deviate from ideal decision-making methods which leads to systematic biases in their judgment, risk attitudes and preferences. While developments in Artificial Intelligence (AI), particularly in generative models, have led to better predictions of economic behavior, the majority of models continue to be based on rational assumptions and do not fully capture these biases. This paper proposes a generative AI approach to model biased decision-making processes. This approach integrates insights from behavioural economics and state-of-the-art generative models to capture a decision-making process that mirrors human behavior. It is designed to provide a range of decision pathways influenced by biases and compare them with the rational decision-making benchmark. This enables a more detailed understanding of the effects of different biases on decision-making in various scenarios. The mechanism captures major cognitive biases - such as anchoring, loss aversion, overconfidence, and confirmation bias - by modelling them as computational operations on structured decisions. This makes it capable of modelling non-linear and context-specific patterns. It also allows comparisons with measures of utility and intuitive visualisations of decision biases. The results demonstrate that models that incorporate cognitive biases are able to explain human behaviour that rational models cannot. This demonstrates the need for incorporating human thought processes in AI decision making. Overall, this work provides a scalable and intuitive framework for modeling human decisions, enabling construction of future AI decision systems that more closely align with expected human behaviour.
Keywords	Cognitive Bias-Aware Decision Making, Generative AI Modelling, Behavioral Economics, Human-Centric AI, Decision Modelling
Published In	Volume 8, Issue 3, May-June 2026
Published On	2026-05-01
DOI	https://doi.org/10.36948/ijfmr.2026.v08i03.76338

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Beyond Rational Choice : A Generative AI Framework for Modelling Cognitive Biases in Economic Decision Making

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