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A Behavioral Model of Rational Choice
Abstract
Introduction, 99. — I. Some general features of rational choice, 100.— II. The essential simplifications, 103. — III. Existence
and uniqueness of solutions, 111. — IV. Further comments on dynamics, 113. — V. Conclusion, 114. — Appendix, 115.
... Decision Theory has the fundamental goal of understanding and improving the decisionmaking process in situations where individuals or organizations face multiple alternatives and must select the optimal option. This science aims to develop models and meth ods that allow for the structured evaluation of available alternatives, considering factors such as uncertainty, individual preferences, risks, and the rewards associated with each choice [24] [25]. Essentially, Decision Theory has two main branches: ...
... These attributes often hold varying levels of importance for each individual, which explains why different people arrive at different evaluations when considering the same set of alternatives [24]. Decisions related to the choice or evaluation of a specific object or activity can be considered as a complex task [25]. These activities, even when performed automatically, are often regarded as demanding and challenging. ...
... One of the main reasons is that the elements being chosen or evaluated typically consist of a set of attributes that are difficult to compare [33]. Furthermore, when the evaluation involves multiple non-binary numerical attributes, the complexity increases significantly [25]. This type of problem is known as multi -attribute decision making (MADM). ...
Information and communication technologies have brought about a revolution in how we perceive, interpret, and learn. This ever-changing landscape presents both challenges and opportunities for enhancing students' learning experiences through innovative tools and strategies. One such strategies is collaboration and serious games into teaching, offering safe environments to solve real-world problems, improve comprehension and knowledge acquisition, develop technology skills, foster cooperation and collaboration, and provide an engaging and interactive learning experience. However, the development of effective simulation games requires careful consideration of various factors, including aesthetics, interface, gameplay, learnability, feedback, challenge, immersion, and game design, to name just a few. Evaluating simulation games poses a challenge due to interdisciplinary involvement and the lack of standardized methodology. This article proposes a methodological approach to assess the attributes of simulation games, providing valuable insights for informed decision-making regarding their design, improvement, effectiveness, and challenges in the realm of serious games.
... The EU and SEU frameworks have often been criticized on the grounds that they are psychologically unrealistic. As Savage (1954) acknowledged and Simon (1955Simon ( , 1983 highlighted, these frameworks make arduous demands on decision makers (Supplemental Appendix A). People do not typically have full knowledge of all potential consequences (or outcomes) 2 of their choices, never mind their probabilities. ...
... 3 Paul's (2014) challenge to the standard utility approach does not reside in the occurrence of a transformative experience per se. Even a seemingly mundane decision can result in a transformative experience (e.g., jumping into a shallow river can cause devastating injuries) because of an unanticipated consequence, for which there is no room in the classic maximization framework (Simon, 1955). Rather, Paul's challenge resides in the necessity to choose in situations where it is impossible to mentally simulate the utilities of potential consequences at the moment of choice. ...
... Many scholars of the mind follow this approach and see cognition in an uncertain world in terms of a universal optimizing prediction machine (e.g., Clark, 2016;Griffiths et al., 2010;McClelland et al., 2010;Rumelhart et al., 1986). In contrast, our approach follows a satisficing approach (Simon, 1955(Simon, , 1990, assuming that a decision maker can achieve a good enough, but not optimal, solution given the actual-not simplified-conditions. 4 Here we propose an ecological satisficing framework for transformative life decisions. ...
Research on judgment and decision making typically studies “small worlds”—highly simplified and stylized tasks such as monetary gambles—among homogenous populations rather than big real-life decisions made by people around the globe. These transformative life decisions (e.g., whether or not to emigrate or flee a country, disclose one’s sexual orientation, get divorced, or report a sexual assault) can shape lives. This article argues that rather than reducing such consequential decisions to fit small-world models, researchers need to analyze their real-world properties. Drawing on principles of bounded and ecological rationality, it proposes a framework that identifies five dimensions of transformative life decisions: conflicting cues, change of self, uncertain experiential value, irreversibility, and risk. The framework also specifies simple, versatile choice strategies that address these dimensions by, for instance, breaking down a decision into steps, avoiding trade-offs between present and future selves, or sampling others’ experiences. Finally, it suggests benchmarks for assessing the rationality of transformative life decisions. Methodologically, this framework adapts a long tradition of mainly lab-based judgment and decision-making research to a text-based approach, thereby setting the stage for empirical work that analyzes real-world decisions using natural-language processing. Only by understanding decisions with the potential to transform life trajectories—and people in the process—will it be possible to develop encompassing and inclusive theories of human decision making.
... Rational inferential decision-making theories obtained from human or robot studies to date assume that a model me be used either off-line or on-line in order to compute satisficing strategies that maximize appropriate utility functions and/or satisfy given mathematical constraints (Simon, 1955;Herbert, 1979;Caplin and Glimcher, 2014;Nicolaides, 1988;Simon, 2019). When a probabilistic world model is available, for example, methods such as optimal control, cell decomposition, probabilistic roadmaps, and maximum utility theories, may be applied to inferential decision-making problems such as robot active perception, planning, and feedback control (Fishburn, 1981;Lebedev et al., 2005;Scott, 2004;Todorov and Jordan, 2002;Ferrari and Wettergren, 2021;Latombe, 2012;LaValle, 2006). ...
... Humans have also been shown to use internal world models for inferential decision-making whenever possible, a characteristic first referred to as "substantial rationality" in (Simon, 1955;Herbert, 1979). As also shown by the human studies on passive and active satisficing perception presented in this paper, given sufficient data, time, and informational resources, a globally rational human decision-maker uses an internal model of available alternatives, probabilities, and decision consequences to optimize both decision and information value in what is known as a "small-world" paradigm (Savage, 1972). ...
Inferential decision-making algorithms typically assume that an underlying probabilistic model of decision alternatives and outcomes may be learned a priori or online. Furthermore, when applied to robots in real-world settings they often perform unsatisfactorily or fail to accomplish the necessary tasks because this assumption is violated and/or because they experience unanticipated external pressures and constraints. Cognitive studies presented in this and other papers show that humans cope with complex and unknown settings by modulating between near-optimal and satisficing solutions, including heuristics, by leveraging information value of available environmental cues that are possibly redundant. Using the benchmark inferential decision problem known as “treasure hunt”, this paper develops a general approach for investigating and modeling active perception solutions under pressure. By simulating treasure hunt problems in virtual worlds, our approach learns generalizable strategies from high performers that, when applied to robots, allow them to modulate between optimal and heuristic solutions on the basis of external pressures and probabilistic models, if and when available. The result is a suite of active perception algorithms for camera-equipped robots that outperform treasure-hunt solutions obtained via cell decomposition, information roadmap, and information potential algorithms, in both high-fidelity numerical simulations and physical experiments. The effectiveness of the new active perception strategies is demonstrated under a broad range of unanticipated conditions that cause existing algorithms to fail to complete the search for treasures, such as unmodelled time constraints, resource constraints, and adverse weather (fog).
... A partir de mediados del siglo pasado, sin embargo, comenzaron a tejerse discusiones sobre la plausibilidad del modelo caracterizado por el homo economicus. La más notable crítica provino de Herbert Simon (Simon, 1955), para quien resultó fundamental considerar que el ser humano es un agente de limitadas capacidades cognitivas (v. g., limitada capacidad de cálculo y memoria), aspecto imperativo para comprender los procesos de toma de decisiones, donde no solo entran en juego estas limitadas capacidades, sino también cualidades de orden no cognitivo, como las emociones o la imitación. ...
El neuroliberalismo es el modo de gobernar basado en el uso del conocimiento conductual, psicológico y neurológico para, deliberadamente, moldear la conducta humana dentro de sociedades libres. Esta aproximación a la gobernanza psicológica ha tomado fuerza en décadas recientes y se sustenta en una visión pesimista de la racionalidad humana, cuyo núcleo conceptual es el determinismo cognitivo, tesis que plantea la inevitable tendencia al error en las decisiones de las personas, de la mano de la naturaleza cognitiva humana. Mi objetivo en este trabajo es articular una visión de la naturaleza intelectual humana alternativa a la propuesta por el neuroliberalismo, partiendo de un enfoque centrado en la virtud intelectual. Argumento que las virtudes intelectuales son cualidades esenciales para constituir una forma de racionalidad relacional, alejada de los extremos que representan tanto la visión de la economía neoclásica (homo economicus) como la del neuroliberalismo (homo psychologicus), puesto que los seres humanos pueden trabajar para cultivar cualidades que les permitan cooperar para la consecución de conocimiento y la toma de decisiones informadas, y no resignarse a una forma de gobernar que desconfía de la agencia intelectual de las personas, su autonomía, su reflexividad, así como de su capacidad para responsabilizarse de la obtención de conocimiento y la toma de decisiones sobre aspectos sustanciales de sus vidas.
... (Simon, 1990). Dans ce cas-ci, il met en place des stratégies appelées heuristique, lui permettant de pallier cette incertitude et le comportement adopté sera davantage considéré comme satisfaisant plutôt qu'optimal (Simon, 1955(Simon, , 1990. ...
... Первое издание книги вышло в 1976 году, в период беспрецедентных открытий в когнитивистике. В 1974 году Даниэль Канеман и Амос Тверски выпустили знаменитую статью о когнитивных ограничениях суждений в условиях неопределенности (Tversky and Kahneman 1974), и в целом этот период в социальных науках проходил под сильным влиянием работ Герберта Саймона об ограниченной рациональности (Simon 1955). Эти прорывные исследования позволили Джервису серьезно модифицировать доминировавший теоретико-игровой подход к анализу стратегических взаимодействий между государствами, разработанный экономистом Томасом Шеллингом (Schelling 1960). ...
Роберт Джервис (1940–2021), классик теории международных отношений, находит дорогу к русскоязычному читателю. Это серьезное событие, если иметь в виду влияние Джервиса в своей области. Джервис стал одним из самых цитируемых авторов дисциплины благодаря тому, что скомбинировал теорию международных отношений с когнитивной психологией. Это позволило объяснить, каким образом государственные деятели принимают ключевые внешнеполитические решения. Основная работа, в которой он изложил свой подход, – «Восприятие и неверное восприятие в международной политике» (Perception and Misperception in International Politics). Текст на русском языке
... In contrast, Savage (1954) posits that the mechanism through which economic agents formulate expectations under conditions of both risk and uncertainty is analogous, predicated on the premise that agents construct expectations as though they subscribed to beliefs encapsulated by a probabilistic framework. The theoretical exploration of expectation formation has evolved through several approaches: (i) the adaptive expectations theory (Cagan, 1956), which argue that agents iteratively adjust their expectations based on past forecasting errors; (ii) the rational expectations (RE) framework (Muth, 1961), which asserts that any discrepancy between agents' expectations and perfect predictions is due solely to random shocks; and (iii) the "bounded rationality" paradigm (Simon, 1955), which highlights the cognitive limitations individuals face when processing new information, suggesting that agents' rationality is inherently constrained. ...
... The first is that stocks with lower media coverage need to offer higher returns to compensate their investors (Easley et al., 2002;Merton, 1987). The second is that low-media-coverage stocks receive little investor attention, leading to investors' underreaction to new information, causing stock prices to reflect new information slowly (Simon, 1955). The third is that public news contains no new information, only drawing the attention of noise traders, and insider investors may affect stock prices by using their private information (De Long et al., 1990). ...
To study the impact of media attention for carbon neutrality on excess stock returns and the effect of investor sentiment, we first crawled news reports and investor comments from mass media and social media using Python programming language. Then we used text analytics and Bi-directional long-short-term memory (BiLSTM) to get media attention and investor sentiment indexes from the news reports and online comments. Further, the effects of media attention and investor sentiment on excess stock returns were studied. The regression results of daily and weekly data show that there is a significant positive correlation between media attention for carbon neutrality and excess returns of carbon-neutrality-related stocks. Moreover, investor sentiment plays an important moderating role in the relationship. In particular, the more positive the investor sentiment, the larger the size of the media effect.
... Tversky and Kahneman's Prospect Theory in 1979 [45] revolutionized preference modeling by acknowledging the role of psychological factors and the impact of framing on decision-making. Bounded rationality, as proposed by Simon in 1955 [46], recognizes that individuals have limitations in processing information, influencing how preferences are formed. ...
Distance-based Multi-Criteria Decision Making (MCDM) methods offer a robust framework for evaluating and ranking alternatives amidst conflicting criteria. As a subset of multi-attribute decision making, distance-based methods in existing literature primarily focus on analyzing alternatives based on their distances to reference points, such as positive, average, or negative ideal solutions. However, the literature lacks a technique where the reference or target point is the decision itself. Despite their conceptual simplicity, visual appeal, and flexibility, which make them valuable across various academic disciplines, these methods require meticulous selection of distance metrics and reference points. Moreover, there is a notable absence of vector-based multi-attribute decision-making methods. Unlike distance-based approaches, vectors include both magnitude and direction, making them more adept at capturing dimensional positioning and similarity operations. To address this gap, this article introduces a novel vector-based MCDM methodology called the Vector Based Preference Aided Ranking System (V-PARS). This methodology, grounded in Nudge Theory and preference ordering, positions the decisions themselves as the reference point, rather than the traditional positive-negative-average decisions. It incorporates both objective and subjective data, including crisp and uncertain (score, fuzzy, etc.) data, and addresses normalization and scaling in MCDM procedures. The proposed framework is applied to evaluate micromobility vehicles within the context of Paris, France, aligned with the European Commission’s 2050 targets. The rise of micromobility solutions, such as scooters and e-bikes, has introduced additional complexity into urban transportation planning. Therefore, selecting suitable micromobility vehicles for specific contexts requires a systematic approach. The V-PARS methodology facilitates this process by identifying and ranking micromobility vehicles based on their suitability for different city districts, ultimately contributing to more informed and sustainable transportation decisions.
... Other factors, such as cognitive overload, frustration with an existing service, or a declining user experience, may also contribute to the phenomenon. For example, previous research has shown that rational decision-making is bounded by cognitive constraints and availability of information (Simon, 1955), or is subject to heuristics and biases, i.e., users may not systematically analyze the specific configuration of a given service but jump to a conclusion (Tversky and Kahneman, 1974). For platforms that are not subject to high interoperability, research shows a certain level of inertia towards switching to new services (Polites and Karahanna, 2012). ...
Current legislation and market dynamics require and encourage systems to become more open and interoperable. Given this shift, the challenge arises as to how service providers can navigate such environments and whether and how known platform economics are affected by that change. In this context, our work investigates behavior when users interact with services in highly interoperable environments, examining the influence of service attributes and platform economics on service selection and switching decisions, with a focus on the role of transaction cost and time, onboarding time, privacy, ownership, and community. For this purpose, we designed and conducted an extensive survey study with more than 500 respondents that combined a conjoint study with an experimental part on switching scenarios. Our findings suggest that transaction features such as cost, time, and privacy are the main factors in service selection with part-worth utilities being 2.1 to 14.7 times higher than non-transactional features. Additionally, building a strong community and offering ownership opportunities to users are effective strategies for customer retention. Further, we observe that rational choice theory does not explain switching decisions in many cases. Our study has important implications for both industry practitioners and policymakers. Practitioners can use our results to carefully manage effective customer retention strategies, while policymakers can use them to better regulate digital markets.
... To stay is rejected and to change is required. In this setting the threshold levelĝ(x) can be an aspiration level [47], a satisficing level [48] or a promotion goal [49]. Then, in the current period, if after having done x k in the previous period k, the individual setsĝ(x k ) > g(x k ), i.e., x k / ∈ C(x k ), this means that, in the current period, he wants to improve enough his level of satisfaction when moving from having done x k in the previous period to do x k+1 in the current period. ...
... The choice-as-decision-making perspective is anchored in the field of behavioral decisionmaking (Tversky and Kahneman, 1974). This perspective goes against the assumption of consumer rationality, stressing that consumers are rarely capable of acting rationally because of their limited cognitive capacity (Simon, 1955). The perspective therefore stresses that giving consumers more choice or choice-related information is not necessarily liberating or enabling political participation because doing so can result in a situation of "choice overload" (Scheibehenne et al., 2010). ...
Consumer choices are always relationally produced, an outcome of consumers’ inevitable reliance on such entities as choice architectures, calculation tools, discourses, and more. This means that giving consumers choice does not make them free from external influences. But if consumer choice cannot fully liberate consumers, must we abandon choice promotion as a path to consumer empowerment, a widely embraced approach in neoliberal societies? While this seems to be the conclusion of many critics of empowerment-through-choice, this conceptual article argues that choice promotion can still play an important role in empowering consumers. We make our case by developing a Callonian perspective on choice and consumer empowerment, which calls attention to the role of “calculative devices” in configuring consumers as more or less powerful choosers. We identify four qualities of calculative devices that enhance the “calculative power” of consumers: (1) calculative enrichment, (2) calculative stabilization, (3) calculative flexibilization, and (4) calculative contestation. The Callonian perspective opens new ways to study consumer empowerment and offers a critical account of consumer autonomy.
... En segundo lugar, la crítica a esta escuela afirma que los electores no cuentan con la misma información, ya que esta no es perfecta y es entendida, asimilada y usada de diversas maneras dependiendo del grado de sofisticación política de los electores. En tercer lugar, se critica que el votante actúa de acuerdo a su interés propio, y de acuerdo con Simon (1955), los electores toman decisiones con base en una racionalidad de baja 20 información. Por lo tanto, este modelo tiene sus limitaciones en cuanto a las diferencias en la cantidad y calidad de información que los electores tienen a su disposición, así como la manera en la que es procesada por estos, dependiendo del grado de conocimiento político que tengan. ...
Las encuestas electorales, omnipresentes durante las campañas en México, han transformado el panorama político al influir potencialmente en las decisiones de los votantes. Este estudio se centra en entender su impacto en el comportamiento electoral mexicano, un aspecto poco explorado en una democracia joven como la de México. Mientras investigaciones previas han analizado factores como la identificación partidista y los grupos de referencia (Moreno, 2003, 2009, 2018; Moreno y Meixueiro, 2012), esta investigación introduce un enfoque novedoso: el peso de las encuestas frente a otros factores determinantes.
Con el objetivo de analizar esta influencia y compararla con otros factores relevantes, se tomó como caso de estudio la elección extraordinaria a gobernador en Puebla. Utilizando un diseño mixto secuencial explicativo (Creswell, 2014), la investigación combinó una encuesta en línea con grupos de enfoque en diversas regiones del estado.
Los resultados revelaron que la identificación partidista está en declive, los grupos de referencia influyen cuando los electores se sienten desinformados, y las encuestas ejercen un impacto notable cuando los votantes son cuestionados directamente sobre ellas, aunque tienden a negar su influencia de manera general. Estos hallazgos arrojan luz sobre el comportamiento electoral en México y su relación con una de las herramientas más controvertidas de las campañas modernas.
... Looking beyond monolithic neo-evolutionary models of state-society, recent research highlights the spatial and temporal diversity of social formations (e.g., Chapman 2003;Field et al. 2010;Kujit and Goodale 2009;Wengrow and Graeber 2015). When hinterlands are seen as non-discrete boundary zones, residents become active agents in individual and collective negotiation, both internally and with the core (Cowgill 2000;McGuire 1996;McGuire et al. 1994;Simon 1955). ...
Hinterland studies demonstrate the capacity to highlight nuance in regional and temporal variation in the Polynesian past. This Special Issue highlights a group of papers which focus on recent topics and themes drawn from case studies situated in different parts of the Polynesian region. In this article, we summarize the history of hinterland studies, introduce the articles and themes from the Special Issue, and, finally, consider the future of hinterland studies, providing thoughts on a compelling but under-studied avenue of inquiry.
... Bounded rationality is an important concept in behavioral economics and cognitive psychology that challenges the traditional view that individuals always make decisions in a rational and optimal manner. It is based on the idea that humans have cognitive limitations that affect their ability to process information and make fully rational decisions (Simon, 1947(Simon, , 1955. ...
This systematic review examines the influence of emotions on strategic decision-making in business context, from the perspective of behavioral strategy. We examined 1,227 articles from two databases (Web of Science and PsycInfo), and after applying the inclusion and exclusion criteria, the final sample resulted in 43 articles. Our systematic review focuses on the role of emotions in strategic decision-making as well as the decision-making process itself. This systematic review explores research using a variety of approaches and a combination of theoretical and empirical perspectives brought by the literature. It aims to address three main questions: how board members’ emotions influence their decision-making; what insights behavioral strategy provides on the emotional aspect of strategic decision-making; and what are the main theories linking emotions to strategic decision-making in the business context. The results demonstrate how emotions can affect the quality of decisions and imply that conflict resolution and emotional intelligence are relevant skills for making strategic decisions. This analysis supports the need for incorporating emotional insights into strategic planning methods by considering agreeable and divergent points of view.
... This hypothesis acknowledges that investors have a limited window of opportunity to make decisions because they lack the necessary information, and that their limited time and mental perception problems make matters worse. These individuals follow the "rule of thumb" as well (Simon, 1955). ...
This study aims to clarify the mechanisms by which cognitive and emotional biases influence the investment choices of retail investors who trade on the Pakistan Stock Exchange (PSX), in addition to mediation of risk perception. The behavior of retail investors in the least developing or emerging financial markets is not generally recognized, with most studies concentrating on well-developed financial markets. Utilizing a sample of 385 traders who are investors in the PSX, data was gathered through a purposive sampling technique. The descriptive analysis was conducted using IBM SPSS 27, while the measurement model and SEM assessments were conducted through SmartPLS 4.1.0.3. The findings reveal that biases, including representativeness bias (? = -0.185, p < .05), availability bias (? = -0.223, p < .000), and regret aversion bias (? = -0.494, p < .000), negatively affect investment choices made by retail investors on the PSX, with risk perception (? = 0.302, p < .000) mediating these relationships. This study, recommended for stock exchange investors and policymakers in collectivist cultures and least developed markets, provides original insights into the mediating role of risk perception, a context often overlooked in research focused on developed markets.
... The interplay between risk aversion and the psychological concepts found in prospect theory (Kahneman and Tversky, 1979) is central to understanding how decisions are made. Simon (1955) underscores the gap between interpreting rational behavior through a psychological lens and empirically analyzing decision-making processes. This requires accounting for environmental factors, individual characteristics, and numerous variables that influence choices, ultimately leading to optimal outcomes. ...
Effective rate rationalization plays a crucial role in modifying tender rates to determine equitable and rational contract amounts, particularly within the context of the construction industry in Malaysia to ensure that contractor prices do not exhibit any front-loading tendencies and establish equitable pricing for variations. Despite the importance of rate rationalization, the Malaysian construction industry grapples with various challenges in the domains of tendering and estimating. These challenges include the scarcity of precise historical data, project intricacy, time limitations, cost variations, restricted technology integration, and the competitive dynamics within the bidding environment. To address these challenges, this study introduces an innovative rationalization model that utilizes the Z-Score Altman model. This model aims to fine-tune the data and establish justifyable rates. and determine reasonable rates through meticulous data integration. Data integration, a widely accepted technique, facilitates smooth data conversion and sharing across diverse applications with different database formats and locations. The proposed model incorporates dynamic algorithms that systematically transfer data between application systems, accommodating various data formats, whether structured or unstructured. Integrating the Z-Score algorithm within the model efficiently filters out extraneous data within the Excel single-sheet file. This algorithm rapidly transfers data to multiple Excel sheets using the macro formulation, recognizing minimum and maximum values, calculating modified means, and employing cut-off analysis to narrow down the rates deemed most favorable. This research rigorously evaluates rates put forth by successful tenderers, staying within established parameters, and providing a durable algorithm that outlines the calculations and conditions guiding this thorough evaluation.
... Although the concept of nudging is relatively new, the literature on behavioral economics has long recognized the role of small changes in the decision-making environment in altering people's choices. Insights from Herbert A. Simon's work on bounded rationality (Simon, 1955) and from Daniel Kahneman and Amos Tversky's studies on heuristics and biases (Kahneman & Tversky, 1972, 1979Tversky & Kahneman, 1973, 1974, 1981 have demonstrated that individuals encounter limitations in their ability to process information, which can result in systematic decision-making errors. This evidence has paved the way for social scientists to recognize the potential of nudging, whereby cost-effective modifications to the choice architecture can gently guide individuals toward better outcomes. ...
Nudges represent a cost-effective and noncompulsory way to promote behavioral change, yet most studies have focused on household domains. As nudges could also benefit work settings, this study aims to explore nudge interventions implemented in workplace environments to determine the behavioral domains targeted and the type of nudge used. A systematic review of literature was conducted. Results show a prevalence of focus on health: Most interventions improve workers’ food choices or increase their physical activity; a few address pro-environmental behavior, and fewer target workers’ performance. Regarding the type of nudge implemented, most studies design interventions that modify the way information is presented. Further research is needed to address the gaps in literature about nudges in organizations, whose complexity is thoroughly discussed.
... Bounded rationality acknowledges significant flaws in rational choice theory by highlighting consumers' inability to make optimal decisions due to inherent limitations. When confronted with intricate decisions, individuals often resort to simplifying the process using 'heuristics' or 'rules of thumb', leading to suboptimal choices [28]. Time inconsistency, also known as present bias or hyperbolic discounting, refers to individuals' inclination to prefer immediate gratification over a larger benefit in the future. ...
This research explores the complex dynamics of personal income tax evasion in Nigeria by adopting a behavioural economics perspective. The primary objective is to uncover concealed aspects of tax evasion and assess its implications for Nigeria’s macroeconomic sustainability, focusing on evidence from the federal capital territory. The study utilizes Ordered Probit model estimation for evaluation. The results reveal that variables related to social preferences, such as trust in government and fairness in the tax system, exhibit a negative association with personal income tax evasion. Conversely, the perception of corruption levels shows a positive correlation with personal income tax evasion. The study findings emphasize that trust in government, fairness in the tax system, tax simplicity, tax salience, tax projection bias, and access to credit are more effective in mitigating personal income tax evasion in Nigeria compared to other variables. Applying principles from behavioural economics, the research uncovers the underlying factors influencing individuals’ decisions to evade income taxes. These insights are anticipated to provide valuable guidance for policymakers, tax authorities, and economists, fostering a nuanced comprehension of tax evasion patterns and proposing potential strategies to enhance compliance and bolster the macroeconomic stability of Nigeria.
... La crítica a este enfoque de la economía clásica y neoclásica vía síntesis neoclásica, viene ya produciéndose desde hace algunas décadas atrás -como ya se ha señalado-. Simon (1955) introdujo el concepto de racionalidad acotada con el cual criticó la capacidad ilimitada de procesamiento de la información atribuida a los agentes económicos, señalando que las personas no siempre están en la capacidad de procesar toda la información y tomar decisiones racionales. Esto se debía a las limitaciones cognitivas, como la atención y la memoria, así también a la complejidad del contexto en la toma de decisiones. ...
El modelo económico dominante, de la Síntesis Neoclásica, presupone que los estudiantes eligen la universidad como personas racionales (homo economicus) y con toda la información del mercado, de modo que se toma la mejor elección. Sin embargo, los sesgos cognitivos, percepciones e influencias revelados por la economía conductual reflejan otro escenario y otros resultados. El objetivo de esta investigación es analizar cómo los principios de la economía conductual pueden servir para modular la decisión en la selección de centro universitario. Para ello se ha realizado una revisión sistemática de literatura aplicando la metodología PRISMA 2020. Se encontró que las barreras de información, la percepción de calidad educativa y la reputación de las universidades están presentes en la selección de la institución educativa, pero también lo están las influencias socio-culturales y las intervenciones (nudges) de los centros. Este estudio pone de manifiesto el giro hermenéutico que supone la economía conductual en campos como la economía de la educación.
Libertarian paternalism (LP) draws on behavioral economics to advocate for noncoercive, nonfiscal policy interventions to improve individual well‐being. However, growing criticism is encouraging behavioral policymaking—long dominated by LP approaches—to consider more structural and fiscally impactful interventions as valid responses to behavioral findings. Keynesian social philosophy allows behavioral policymaking to incorporate these new perspectives alongside existing LP approaches.
O objetivo deste artigo é investigar o uso de nudges aplicados à doação de órgãos para transplantes após a morte diante da alta recusa das famílias. A metodologia contemplou a coleta de dados, publicações e relatórios de pesquisa das principais entidades no assunto, seleção dos principais conteúdos, análise e conclusão. A base de dados científica principal foi a Scopus. Na revisão bibliográfica são apresentadas as ideias dos principais teóricos no assunto como Daniel Kahneman & Tversky, Richard Thaler & Cass Sunstein, além de outros autores igualmente respeitados e suas pesquisas sobre o tema. As três principais abordagens encontradas são o consentimento explícito (opt-in), o consentimento presumido (opt-out) e a escolha mandatória (mandatory choice). Entre os principais achados está que a doação de órgãos é mais bem explicada pela preguiça do Sistema 2, de resposta lenta do cérebro; a pesquisa de Johnson & Goldstein demonstrou o impacto significativo na doação de órgãos da política opt-in e opt-out; as taxas para consentimento presumido são duas vezes mais altas do que as de consentimento explícito; e a maior causa da não concretização da doação de órgãos de potencias doadores notificados no Brasil tem sido a recusa das famílias. Concluímos que nudges podem auxiliar no aumento do número de doadores e a política de doação presumida pode ser adotada também no Brasil semelhante ao que ocorre de forma exitosa em outros países, desde que haja mecanismos de controle, acompanhamento e treinamento contínuo das equipes envolvidas.
Scholars studying engineering design have long identified three essential, interacting elements: the artifact being designed, the actors designing it, and the actions they take to do so. However, concerns about tractability and the effort required to capture data on all three have often led to studies examining only one or two at a time, potentially obscuring important (and explanatory) dynamics. Addressing this gap, Computer-Aided Design (CAD) platforms can observe all three elements simultaneously, unobtrusively, over the entire duration of the design process, and across many different contexts. Whether the research is inductive, abductive, or deductive, these platforms can improve a study’s internal, external, construct, and face validity if wielded wisely. As such, we advocate CAD as the central research instrument to study micro-level engineering design.
The process of transforming healthcare to support population health where care is transitioned into the patient ecosystem has been a challenge for health systems. While health systems interact with patients to co-create or co-produce value to address preventive care or treat specific health conditions in a provider ecosystem, the rest of the patient care journey that includes decision making to seek care and adherence to care practices designed are done in the patient ecosystem, often influenced by multiple social, cultural, and environmental factors. In this chapter, we will look at how one health system that is designing a mix of digital tools to influence patient care journey both inside and outside the provider ecosystem.
How and why has the estimation of dynamic socio-economic effects of policies shaped political decision-making? To address this question, the chapter first presents the prospects and challenges to a rationalist model of evidence-based policy. The chapter shows that criteria developed by the Ministry of Finance for including the dynamic socio-economic effects of policies in forecasting and budgeting have been important for which types of evidence are utilised in socio-economic policy decisions. Despite critiques of the evidence considered when estimating dynamic effects, it is argued that socio-economic policy modelling is a case of evidence-based policy in which evidence has successfully incentivised and shaped formal political decision-making.
Objective: The goal of this study was to generate technical and scientific information to support the inspection of transportation of fresh fruit bunches (FFB) of oil palm in the state of Pará and to estimate the average yield curve (AYC) of FFB of varieties of oil palm cultivated in the municipalities of Pará. Theoretical framework: Theories about limited rationality and asymmetric information was applied to production and commercialization negotiations of FFB oil palm in the state of Pará. Econometric modelling and statistical tests were used to estimate the AY curve and to compare the sample averages among the business production, family farming, and the Brazilian Institute of Geography and Statistics (IBGE). Results and conclusion: The maximum AY of FFB oil palm were estimated for the state of Pará, Brazil (16.27 ± 1.46 t/ha), and to the most productive variety, Compacta-Nigeria (23.86 ± 2.24 t/ha). It was evident that AY of FFB for the Family farmers (average 22.63 ± 3.17 t/ha) was higher than that obtained by companies (average of 17.10 ± 4.05 t/ha) and that reported by IBGE (average of 15.98 ± 1.25 t/ha). The IBGE data are not different or superior to those of companies. Research implications: The study estimated the FFB oil palm AY curve by variety cultivated in the state of Pará to enable the traceability of FFB oil palm production and transportation. It validates IBGE data as a mechanism for monitoring the transit of CFF. Originality/value: The CFF yield curve adds unprecedented scientific knowledge to support the traceability of oil palm production. The data provided by this research contributes to reduce the information asymmetry, and to improve the efficiency of chain Governance.
This book discusses how and why different ways of utilising evidence in government ministries affect policy success and failure. Chapter 1 focuses on the key roles that government ministries play in formulating and implementing policy and influencing the use of evidence in policy-making. The chapter first presents the research gaps and questions explored in the book. Then, arguments for why evidence-based policy remains an appealing ideal for political decision-makers are presented. It is then explained why hopes of evidence-based policy might be disappointed lending to moderators of evidence uptake in policy. Based on distinctions between selective and comprehensive evidence input and variation in formal policy decisions and informal policy management, a typology of evidence in policy is presented. The typology allows the book to define different types of evidence utilisation, which guide the focus of the following empirical chapters. The chapter concludes by considering the Danish context and methods applied to study the use and effects of evidence in government ministries based on three case studies focused on public budgeting policy, public school policy and active labour market policy.
Traditional models of social learning by imitation are based on simple contagion—where an individual may imitate a more successful neighbor following a single interaction. But real-world contagion processes are often complex, meaning that multiple exposures may be required before an individual considers changing their type. We introduce a framework that combines the concepts of simple payoff-biased imitation with complex contagion, to describe how social behaviors spread through a population. We formulate this model as a discrete time and state stochastic process in a finite population, and we derive its continuum limit as an ordinary differential equation that generalizes the replicator equation, a widely used dynamical model in evolutionary game theory. When applied to linear frequency-dependent games, social learning with complex contagion produces qualitatively different outcomes than traditional imitation dynamics: it can shift the Prisoner’s Dilemma from a unique all-defector equilibrium to either a stable mixture of cooperators and defectors in the population, or a bistable system; it changes the Snowdrift game from a single to a bistable equilibrium; and it can alter the Coordination game from bistability at the boundaries to two internal equilibria. The long-term outcome depends on the balance between the complexity of the contagion process and the strength of selection that biases imitation toward more successful types. Our analysis intercalates the fields of evolutionary game theory with complex contagions, and it provides a synthetic framework to describe more realistic forms of behavioral change in social systems.
This Element works as non-technical overview of Agent-Based Modelling (ABM), a methodology which can be applied to economics, as well as fields of natural and social sciences. This Element presents the introductory notions and historical background of ABM, as well as a general overview of the tools and characteristics of this kind of models, with particular focus on more advanced topics like validation and sensitivity analysis. Agent-based simulations are an increasingly popular methodology which fits well with the purpose of studying problems of computational complexity in systems populated by heterogeneous interacting agents.
Behavioral strategy has emerged as one of the most important currents in contemporary strategic management. But, what is it? Where does it come from? Why is it important? This Element provides a review of key streams in behavioral, interpreting behavioral strategy as a consistently microfoundational approach to strategy that is grounded in evidence-based insight in behaviors and interaction. We show that there is considerable room for furthering the microfoundations of behavioral strategy and point to research opportunities and methods that may realize this aim. The Element is of interest to strategy scholars in general, and to Ph.D. students in strategy research in particular.
The article discusses scientific approaches to the study of financial behavior, Russian experience in studying financially literate behavior, and provides definitions of basic concepts. The relevance of studying and forming the financial culture of the population is substantiated. Weaknesses in the studies of financially literate behavior are presented. The authors have developed a methodology for the sociological measurement of financially literate behavior based on the results of expert semi-structured interviews. The high significance of the socio-cultural criterion in assessing financially literate behavior is shown. The work explores the possibilities of developing methodological approaches to measuring the level of financial culture of the adult population, interpreting the formation of financial culture through the categories of “high level”, “medium level”, “low level”, and identifies the rank and weight of each of the indicators used to calculate the index of the development of financial culture.
This article takes a macroeconomic view of the industrial practice of marginally reducing the size/weight of goods or altering the content of goods or services without passing on the cost savings in prices. Although seldom a subject of academic study, this practice has come in for renewed attention with the recent return of inflation because it is one way of containing prices. Variously referred to as “hidden price increases,” “product downsizing,” or “shrinkflation,” it is part of a microeconomic strategy that has macroeconomic effects on both income distribution and consumer well-being.
Purpose
The Internet has introduced new ways of conducting business. Online auction of nonperishable experience goods (NPEG) items, which are generally rare, expensive and durable and need to be experienced to be valued, is one area that is undergoing significant change. Online auction platforms are encouraging participants to interact publicly in a social media type comment format. This paper investigates how such public interactions impact the auction outcomes of NPEG.
Design/methodology/approach
Auction records of vintage automobiles sold between 2015 and 2023 on one of the biggest online auction platforms in the USA were collected. The dataset contains multiple variables per record such as winning bid price, number of comments by sellers and browsers and various details of the automobile, for example brand, vintage and mileage. Ordinary least squares was utilized to analyze close to 42,000 records in the dataset.
Findings
The paper found that comments in general are positively correlated with the winning bid; it also found that online buyers value browser comments higher than seller comments. Furthermore, the relationship between vintage and origin country and winning bid is enhanced by browser comments.
Originality/value
This research furthers theory on two fronts. Firstly, we analyze how auction outcomes are impacted when buyers, casual observers and sellers interact with each other publicly when the auction is ongoing. To the best of the author's knowledge, this is one of the first studies that delve into participant interactions in online ongoing auctions. Secondly, we investigate how potential buyers utilize participant interaction information to guide their decisions about the value of NPEG.
This paper explores how artificial intelligence (AI) may impact the strategic decision-making (SDM) process in firms. We illustrate how AI could augment existing SDM tools and provide empirical evidence from a leading accelerator program and a start-up competition that current large language models can generate and evaluate strategies at a level comparable to entrepreneurs and investors. We then examine implications for the key cognitive processes underlying SDM—search, representation, and aggregation. Our analysis suggests that AI has the potential to enhance the speed, quality, and scale of strategic analysis, while also enabling new approaches, like virtual strategy simulations. However, the ultimate impact on firm performance will depend on competitive dynamics as AI capabilities progress. We propose a framework connecting AI use in SDM to firm outcomes and discuss how AI may reshape sources of competitive advantage. We conclude by considering how AI could both support and challenge core tenets of the theory-based view of strategy. Overall, our work maps out an emerging research frontier at the intersection of AI and strategy.
History: This paper has been accepted for the Strategy Science Special Issue on Theory-Based View.
Funding: The authors are grateful to their collaborating organizations and to the University of Michigan, Bocconi University Junior Researchers’ Grant, and the INSEAD eLab Research Fund for financial support.
This chapter builds on the previous psychological and ethical facets of the police as a swirling and dynamic whirlpool which enlightens a little Other of policing maintained by storytelling and the underlying power of cultural icons such as the Blue Wall of Silence (Westmarland in Policing and Society 15:145–165, 2005) and Hypermasculinity (Bikos in “I Took the Blue Pill” The Effect of the Hegemonic Masculine Police Culture on Canadian Policewomen’s Identities). It uses data from my autoethnographic journals to explore the management of implementation within the police service and presents evidence of the neoliberal managerialist influences which have become well-rooted in police leadership praxis (Johnson in Theoria 61:5–29, 2014).
This chapter examines the literature relating to the introduction of Sect. 26 of the Criminal Justice and Courts Act 2015 in the context of a nascent code of police ethics, the late introduction onto the Bill of the offence of corrupt or improper practice which applies only to sworn police officers, and an exploration of the legal landscape as it impacts on corruption and policing. It also sets out the extrarationality associated with public policy introduction and why defining police corruption is harder than it might seem.
Objetivo: Esta pesquisa teve por objetivo investigar e descrever a manifestação de heurísticas e vieses comportamentais em servidores da administração pública brasileira, em cenários de decisão sob condições de risco. Método: O estudo foi realizado com base na Teoria dos Prospectos, por meio do método experimental, com manipulação intencional de intervenções em grupos de comparação randomizados. Foi aplicado um questionário que contou com a participação de 162 servidores de uma instituição pública federal em Alagoas. Resultados: Os resultados sugerem evidências de que agentes públicos brasileiros participantes desta pesquisa são influenciados por enquadramento, ancoragem, dominância proporcional e dominância assimétrica. Não foi possível comprovar estatisticamente a presença do viés do status quo entre os servidores. Mesmo assim, conclui-se que servidores públicos participantes deste estudo tomam decisões em condições de risco de forma não plenamente racional. Contribuições: Esta pesquisa avança na compreensão dos fenômenos comportamentais na administração pública brasileira e contribui com o fomento de discussões para melhorar a arquitetura de escolhas na gestão pública e, consequentemente, a prestação de serviços à população. Palavras-chave: Teoria dos Prospectos; heurísticas; vieses; governança; setor público.
This This review analyses the application of game theory and behavioural economics to political decision-making in geopolitical hotspots, with a focus on border disputes. Using case studies, it highlights how strategic interactions and psychological factors like loss aversion influence crisis management. The paper aims to provide insights for mitigating tensions and improving conflict resolution strategies
We survey the state of the art of AI applications to financial expectations and the role quantum logic can play in further advancements of AI technologies. We discuss financial applications of such machine learning techniques as reinforcement learning and deep neural networks to the analysis of financial statements, algorithmic trading, portfolio management, and robo-advising. Next, we elaborate on the emergence and advancement of QML (quantum machine learning) and advocate for the wider exploration of the advantages of quantum inspired neural networks, steaming from the use of quantum logic that is able to capture agents’ non- classical expectations and non expected utility decisions, also coined “bounded rationality”. We would like to motivate to use human—like AI techniques that are centered on quantum, rather than classical logic to (i) represent the human brain type information processing; (ii) speed up the work of the AI algorithms; (iii) better operate in complex and uncertain environments.
The dominant practice of AI alignment assumes (1) that preferences are an adequate representation of human values, (2) that human rationality can be understood in terms of maximizing the satisfaction of preferences, and (3) that AI systems should be aligned with the preferences of one or more humans to ensure that they behave safely and in accordance with our values. Whether implicitly followed or explicitly endorsed, these commitments constitute what we term a preferentist approach to AI alignment. In this paper, we characterize and challenge the preferentist approach, describing conceptual and technical alternatives that are ripe for further research. We first survey the limits of rational choice theory as a descriptive model, explaining how preferences fail to capture the thick semantic content of human values, and how utility representations neglect the possible incommensurability of those values. We then critique the normativity of expected utility theory (EUT) for humans and AI, drawing upon arguments showing how rational agents need not comply with EUT, while highlighting how EUT is silent on which preferences are normatively acceptable. Finally, we argue that these limitations motivate a reframing of the targets of AI alignment: Instead of alignment with the preferences of a human user, developer, or humanity-writ-large, AI systems should be aligned with normative standards appropriate to their social roles, such as the role of a general-purpose assistant. Furthermore, these standards should be negotiated and agreed upon by all relevant stakeholders. On this alternative conception of alignment, a multiplicity of AI systems will be able to serve diverse ends, aligned with normative standards that promote mutual benefit and limit harm despite our plural and divergent values.
The concept of risk in managerial economics encompasses various unexpected events such as natural disasters, risk, economic challenges, uncertainty or product failures that lead to undesirable outcomes. Risk arises from incomplete information about future events, which makes the results unpredictable. The inherent uncertainty of the future because of the unpredictable nature of the universe, further complicates the understanding and management of risk. Scientific uncertainty, defined as any deviation from complete determinism, illustrates the difficulty in clearly defining risk. Sometimes managerial economics explores risk through its two primary dimensions, highlighting its complexity and the challenges it presents to decision-makers.
Economists’ conceptions about the “nature of the economic agent” are central to understanding their economic thinking, the phenomena that deserve their attention, the way they build models and theories—as well as the scope and relevance of those theories. Moreover, according to the “psychological” traits of the agent, the subsequent economic theory can accommodate (or not) certain economic phenomena. These claims certainly apply to Brian J. Loasby’s economics. The objective of this article is to survey and analyse Loasby’s reconstruction of economics based on the revision of the psychological foundations of economic agent. We show the influence that George A. Kelly, Adam Smith, Alfred Marshall, Friedrich Hayek and Herbert Simon (among others) play in his work. According to Loasby, concepts such as uncertainty, motivation, imagination, and connecting principles, are central to explaining the growth and organization of knowledge, complexity, and the evolution of economic systems.
The study of rationality is closely linked to the formal study of human judgement and decision-making. Much of the empirical discourse on rationality has been centered on evaluation of quality of human judgments, decisions and behavior. Building upon traditional and recent models in this discourse, this paper examines how motivational and affective processes fundamentally shape rational behavior through their influence on perceptual and cognitive mechanisms. Our analysis demonstrates that rational behavior emerges from the dynamic interaction between motivational drives, emotional states, and cognitive processes, beginning at the earliest stages of information processing. This integrated perspective, grounded in empirical evidence from cognitive neuroscience and psychology, provides new insights into the nature of cognitive biases, suggesting that apparent deviations from rationality may represent adaptive responses when considering how perception and cognition are shaped by motivational and affective states. By emphasizing the foundational role of motivation and affect in driving perceptual and cognitive mechanisms, this work advances our understanding of human rationality and suggests new directions for research.
Emergency managers need data and information to make life-saving decisions on behalf of the public. Operational dashboards, if designed appropriately, can provide this information in a central location and reduce cognitive demands during decision-making. Mesonet websites can serve as a type of operational dashboard that has the potential to provide the meteorological data necessary for emergency managers to make decisions. In this study, we use quantitative content analysis to examine the content, style, structure, and interactivity of 18 Mesonet websites from across the contiguous United States. We find that Mesonet websites vary in the type and amount of content they include. For website style, we find that Mesonet websites primarily present their content with maps and data filters. We find that the structure of the website content was consistent across websites. Finally, we find that most Mesonet websites lacked interactivity, or visual feedback, which inhibits ease of use. We discuss extensions for future work.
Significance Statement
This study captures the content, style, structure, and interactivity of Mesonet websites when they are used as operational dashboards to support weather-related decision-making. Weather dashboards have the potential to support decision-makers of all types during severe weather events by providing all critical information in one place. With this streamlined approach, decision-making is made more efficient, as gathering information from multiple sources is no longer necessary. Mesonet dashboards provide a valuable context to analyze the content, style, and structure of webpages that can be useful for users. Through this work, we hope to identify the design principles and trends present in these dashboards, providing a basis for future research and efforts to improve design, user experience, and accessibility.
This study investigates the effect of loan portfolio diversification on the performance of microfinance institutions. 32 MFIs are selected from various regions employing the quantitative techniques approach. Quantitative data were gathered through questionnaires and performance was also through questionnaires from the MFIs. The research design integrates a cross-sectional analysis to capture a snapshot of current diversification practices on financial performance indicators such as return on assets (ROA) and return on equity (ROE). The findings indicate that MFIs with diversified loan portfolios tend to exhibit better financial performance and lower risk levels, suggesting that diversification is a viable strategy for enhancing the stability and profitability of microfinance institutions.
This research investigates the role of intuition, social consultation, and emotional stability in economic decision-making. Such research always questions the existing models on rational-agent models. While adopting the cross-sectional approach that compares two different age groups adults (18-25 years) and adults (26-45 years)-the way cognitive biases, emotions, and social influences actually shape choices in economic decision-making was examined. In this research, a quantitative research approach was used after collecting data using structured surveys and exploring them using regression and correlation analysis. The key findings of this research suggest that the majority of the sample population makes use of intuitive and heuristic-based strategies, especially when situations present uncertainty. Findings also come in line with behavioral economic theories such as Prospect Theory and Social Influence Theory. In a nutshell, it was discovered that emotional factors as well as social validation are significant in framing decision-making behaviors, and further, economic models must account for these non-rational influences to provide a richer understanding of human behavior in an economic context. This research fits into the discussion on behavioral economics by shedding light on psychological elements in economic decisions and their implications on policy design.
A distinction is drawn between a sales contract and an employment contract, and a formal model is constructed exhibiting this distinction. By introducing a definition of rational behavior, a method is obtained for determining under what conditions an employment contract will rationally be preferred to a sales contract, and what limits will rationally be placed on the authority of an employer in an employment contract. The relationship of this model to certain other theories of planning under uncertainty is discussed.
This paper seeks to survey the literature in economics, philosophy, mathematics, and statistics on the subject of choice among alternatives the consequences of which are not certain. Attention is centered on the suggested modes of describing uncertainty and on the theories of rational and actual behavior of in individuals making choices.