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Rational Roots of “Irrational” Behavior: New Theories of Economic Decision-Making

Published online by Cambridge University Press:  10 May 2017

James J. Opaluch  and
Kathleen Segerson
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Abstract

The neoclassical paradigm has proven to be a rich approach for evaluating a variety of issues for individual and social decision-making. However, an increasing body of literature suggests that actual behavior systematically violates the neoclassical utility model. This paper reviews a number of alternative models for decision-making. Results from the literature show several examples of apparently “irrational” behavior that can be explained in terms of these alternative motivations. The paper also extends the received literature by examining in some detail the implications of one such model which is based on the psychological feeling of ambivalence. The paper demonstrates that ambivalence has the potential for explaining the appearance of intransitive choices, the use of rules of thumb in decision-making and the large discrepancies between stated willingness-to-pay and willingness-to-accept, all of which have been observed in various settings. There are potentially great rewards from innovative research that expands the neoclassical paradigm to incorporate additional motivational factors in decision-making.

Type
Invited Presentation
Information
Northeastern Journal of Agricultural and Resource Economics , Volume 18 , Issue 2 , October 1989 , pp. 81 - 95
Copyright
Copyright © 1989 Northeastern Agricultural and Resource Economics Association 

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Footnotes

The authors wish to acknowledge the support of the Rhode Island Agricultural Experiment Station (AES Contribution No. 2501), Rhode Island Water Resources Center and the Northeast Agricultural and Resource Economics Association.

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