Week 1

Question 1

what is rational choice theory?

Answer 1

states that individuals use rational calculations to make rational choices and achieve outcomes that are aligned with their own self-interests, which allows you to make the best possible decision. if someone acts in their best interests, they’re behaving rationally
- it is a normative/ ideal model -> how we should make decisions.

Question 2

what is decision theory?

Answer 2

its multidisciplinary and is about choice. its main concern is the nature of rationality, what principles of rationality govern choice?

Question 3

what has rational choice theory been turned into in economics?

Answer 3

instrumental rationality - where a person adopts the best means to achieve their ends/ decision and so act to maximise one’s goals

Question 4

what is dominant actor?

Answer 4

an intentional being, that is guided by intention and, is consistent in their decisions, not emotional, able to explore and evaluate all information in pursuing their best interests. they’re not biased and don’t make systematic errors.
- they are the perfect decision maker who make moves that aligns with their best interests

Question 5

what is the anthropomorphisation of organisations?

Answer 5

where they have purpose and intent and are designed to achieve goals or ends.
- Goal rationality + instrumental rationality = economic rationality.

Question 6

what is the homo-economicus rational decision maker model of decision making?

Answer 6

1. define problem
2. identify criteria
3. weigh criteria
4. generate alternatives
5. rate each alternative
6. choose alternatives which maximise self-interest

Question 7

what did Simon (1959) say about rational choice theory?

Answer 7

he critiqued rational choice theory and stated that the idea that organisations and humans are always going to act in a way that is self-interested in a completely unbiased way isn’t possible.
- as humans we are inherently flawed

Question 8

what is bounded rationality? (Simon, 1959)

Answer 8

it recognises our informational and computational capacities as human beings, even if we did have all the info we wouldn’t have the computational power to make a fully rational decision.
so bounded rationality states that individuals in an environment, will settle/ satisfice with a reasonable decision rather than 100% best decision