Rationality

Question 1

What is rationality?

conventional

econ

psych

Answer 1

1. Adherence to a normative model (such as probability theory or decision theory)
2. Economists - assume a. people are rational actors and b. rationality increases with experience
3. Psych - research indicates “irrational behavior in some cases….. may be due to evolutionary fitness reasons
4. Simpler strategies more successful in some environments
5. Though sometimes behaviour can be changed by modyfing the environment (decision architecture/nudging)…. liver donor study

Question 2

Bounded rationality

Answer 2

the idea that the mind evolved short-cut strategies for reasonable solutions to real-world problems

Question 3

Herbert Simon

Answer 3

proposed bounded rationality….. criticized rational models of decision making for ignoring situational and personal constraints (time pressure, limited cognitive capacity)

Question 4

heuristics

Answer 4

mental shortcuts (vs. algorithms)

Question 5

1st programme of bounded rationality research

Answer 5

focused on systematic errors (biases) that could occur through the use of heuristics…… primary aim was to elucidate nature of heuristics

Question 6

2nd programme of bounded rationality research

Answer 6

emphasized the positive outcomes that can result from the use of heuristics…….. often because of interaction btwn human mind/encironment

Question 7

adaptive decision maker approach

Answer 7

argues that ppl have a variety of possible strategies available to them when deciding…………. which strategy ends up being used depends on how much effort it requires and the importance of accuracy

Question 8

6 Cognitive processes underlying DM

Answer 8

MELMAC -

Memory, Encoding/evaluation, Learning, Multiple sources of info, Attention (exogenous vs. endogenous), Characteristics or individual differences