Rational Choice Theory Flashcards
What are opportunity costs?
Opportunity costs: is the cost of forgoing (verzichten) the best alternative use of a resource. It is the value of the next best option in order to pursue a certain action or decision. It represents the trade-off (Kompromiss) between two choices and helps in making a rational decision by comparing the costs and benefits of each option.
What is corruption?
- corruption can influence decision-making processes
- it refers to abuse of power or position for personal gain
- it involves exchanging bribes, gifts or other form or illegal compensation in exchange for favors or favorable treatment
- it is illegal and unethical and it undermines trust in government and rule of law
What is Lobbying?
Lobbying can also influence decision-making processes often made by government officials and typically by representing the interests of a particular group or an individual
a) direct lobying (meetings with government officials)
b) grassroots lobbying (mobilizing public support)
c) campaing contributions
–> it is a critized pratice.
What is the rational choice theory?
= individuals use rational calculations to make rational choices and achieve outcomes that are aligned with their own personal objectives. These results are also associated with and individuals, best self-interest.
- All available information’s are used to weigh the cost and benefits in order to make a rational choice that will help them attain happiness maximising utility!
- In reality it is rarely the choice
- ## It is based on the individual’s preferences and views and is constraint by time, income cognitive ability an access to information
What does heuristic technique mean?
is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate, short-term goal or approximation. Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution. Heuristics can be mental shortcuts that ease the cognitive load of making a decision.
What is the theory of bounded rationality?
- People are not always able to obtain all the information they need to make the best possible decision.
Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal
What three characteristica influence ones decision?
a) preferences/views
b) Opportunity Costs
c) (Institutional) Constraints
What is the Framing Effect?
The framing effect is when our decisions are influenced by the way information is presented. Equivalent information can be more or less attractive depending on what features are highlighted
How does the realistic procedure in decision making looks like?
a) problem identification
b) search for criteria & alternatives
c) solutions that are fast to find & obvious
d) choice of first sufficient alternative & which is easy to implement
What is the invisible hand theory?
- This concept suggests that rational actors acting with their own self-interests in mind can actually create benefit for the economy at large.
Characteristica for rational choices in sport organisations:
a) organisational goals are often ambigious and not consistent
b) decision making are often simple procedures, bounded rationality (satisfactory decision rather than optimal decision)
c) no clear decision rules, aimed at finding an acceptable alternative, decisions are often made in groups (Brandwagon effect & Bolstering)
How can people overcome coginitive biases?
- rely on measurements and empirical evidence
- use the diligence based strategy –> improvement of fundamental operations that lead to success. Such as:
- sourcing inputs
- managing customer relationship
- developing poeple
