Lecture 2: Rational Decision Making: Myths And Confusions

Question 1

Rational Decision Meaning

Answer 1

Consider all of the states of the world (outcomes) associated with each potential option.
Weights the outcomes based on probability and personal values in a consistent way.
Select the option that weight most desirable outcomes
Choice consistent with our values.

Question 2

Modern Rational Choice Theory

Answer 2

Future oriented (focus on future outcomes)
Avoids pathological (dumb) behavior
A way making decisions in consistent way that given what you think is going around of the world and what you want gives the best chance of getting what you want. Not judge the content of the value.

Question 3

Pseudo-irrationality

Answer 3

What seems rational may no be and irrational may be rational.

Question 4

Myth about Rationality is “Cold”

Answer 4

The rational behavior depends on values
The content of these values is not in question but their consistency.
Emotion is neither rational nor irrational

Question 5

Myth about Rationality is Egoistic (自负)

Answer 5

Rational behavior is assessed in terms of the decision maker’s values
If the decision maker’s values are altruistic, it is rational for him or her to behave altruistically.

Question 6

Myth about Rationality players always win

Answer 6

The action chosen will be the best available but may not be the best conceivable.
Actors face limited information.

Question 7

Descriptive Models (What is)

Answer 7

Rational behavior as a predictive device
Empirical of it works or it doesn’t

Question 8

Normative Models (What ought to be)

Answer 8

Rational behavior as a prescription for making decisions
Evaluative of we accept it or we don’t