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An exploratory analysis of composite choices: Weighing rationality versus irrationality

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  • Lester, Bijou Yang
Abstract
Humans are engineered neurologically to make rational and irrational choices. This paper introduces a new paradigm for decision making – a composite choice model – in which economic agents are constantly weighing rationality versus irrationality when encountering options. In an exploratory, deterministic, two-period model, an assumption of a two-way cross-embedment (i.e., a two-way interaction between the rational and irrational components) results in a paradoxical phenomenon, an outcome of either tending toward bliss or abyss at the end of the first period. This implies, for instance, a psychological struggle between two selves within the mind. The paradigm proposed is compared to the dual-process theories recently developed by the cognitive sciences. Future research will explore implications for public policy design and implementation.

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  • Lester, Bijou Yang, 2011. "An exploratory analysis of composite choices: Weighing rationality versus irrationality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 949-958.
    • Handle: RePEc:eee:soceco:v:40:y:2011:i:6:p:949-958
    DOI: 10.1016/j.socec.2011.08.024
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    Cited by:

    1. Tomasz Potocki, 2012. "Cumulative Prospect Theory as a model of economic rationality," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 31.
    2. Elliot T Berkman & Evgeniya Lukinova & Ivan Menshikov & Mikhail Myagkov, 2015. "Sociality as a Natural Mechanism of Public Goods Provision," PLOS ONE, Public Library of Science, vol. 10(3), pages 1-18, March.

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    More about this item

    Keywords

    Composite choices; Inclination to rationality; Irrationality; Cross-embedment; Abysmal trap;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D00 - Microeconomics - - General - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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