Describe the core differences between traditional economic models and behavioral economics, focusing on the assumptions about human rationality and their implications for market analysis.

Traditional economic models and behavioral economics represent fundamentally different approaches to understanding how people make decisions, and therefore how markets function. The core divergence lies in their assumptions about human rationality. Traditional economics, often referred to as neoclassical economics, is built on the premise of "homo economicus," a theoretical construct of a perfectly rational individual. This person is assumed to have consistent preferences, unlimited cognitive capacity, and the ability to make optimal choices by carefully weighing all available information, aiming to maximize their utility (satisfaction). This model assumes that people are primarily motivated by self-interest, always make choices that provide the greatest value, and are consistent in their preferences. In this paradigm, market behavior is seen as the aggregation of all these perfectly rational choices. In contrast, behavioral economics acknowledges that humans are not entirely rational. It challenges the "homo economicus" concept, recognizing that people’s decision-making is influenced by a range of psychological, social, and emotional factors, often leading to choices that deviate from what traditional models would predict. Behavioral economics incorporates insights from psychology and other fields to understand these deviations, focusing on real-world human behaviors, with all their inconsistencies and biases, instead of the ideal version assumed by traditional models. One major difference is how these fields treat cognitive limitations. Traditional economics assumes unlimited cognitive capacity, sugg....