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Application And Misapplication
“Effectively solving some economic problems requires one to think in terms of differences while others require one to think in terms of ratios,” Dr. Mahmoudi said.
“Because both types of thinking are necessary, it is reasonable to think people develop and apply both types. However, it is also reasonable to expect that people misapply the two types of thinking, especially when less experienced with the context.”
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MORE IDEAS ON THIS
Relative Differences And Absolute Differences
A new theory of economic decision-making from Mina Mahmoudi, a lecturer in the Department of Economics at Rensselaer Polytechnic Institute, offers an explanation as to why humans, in general, make decisions that are simply adequate, not optimal.
In researc...
37
334 reads
The $5 Test
Past studies have shown that when given the opportunity to save, for example, $5 on a $25 item or a $500 item, people in general would put in more effort to save the money on the lower-cost product than the more expensive item.
They believe they are getting a bette...
39
249 reads
Α Case Against The Logic Of Maximizing Behaviour
“Understanding how the cognitive and motivational characteristics of human beings and the operating procedures of organizations influence the working of economic systems is of critical importance,” Dr. Mahmoudi said.
“Many economic behaviors such as imitation oc...
31
231 reads
CURATED FROM
New Theory of Decision-Making Seeks to Explain Why Humans Don’t Make Optimal Choices
neurosciencenews.com
4 ideas
·1.07K reads
IDEAS CURATED BY
People consider relative differences and not only absolute differences when making various economics decisions, even in those cases where the rational model dictates that people should consider only absolute differences. A new theory seeks to explain why.
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