Schilirò, Daniele (2011): Economics and psychology.Perfect rationality versus bounded rationality.
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Classical mathematical algorithms often fail to identify in time when the international financial crises occur although, as the classical theory of choice would suggest, the economic agents are rational and the markets are or should be efficient and behave also rationally. This contribution does not pretend to give a complete answer to these questions, but it will highlight some well-known limits of the classical theory of rational choice and compare this theory of choice with the approach that seeks to combine economics and psychology and that has established itself as cognitive or behavioral economics. In particular, the present paper will focus on the juxtaposition of the concepts of perfect rationality and bounded rationality. It concludes with some references to the literature of behavioral finance which has given important contributions in explaining the behavior and the anomalies of financial markets.
|Item Type:||MPRA Paper|
|Original Title:||Economics and psychology.Perfect rationality versus bounded rationality|
|Keywords:||Bounded rationality; procedural rationality; rational choice; cognitive economics|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional; Evolutionary
C - Mathematical and Quantitative Methods > C0 - General > C00 - General
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
|Depositing User:||Daniele Schilirò|
|Date Deposited:||24. Oct 2011 22:55|
|Last Modified:||15. Feb 2013 19:27|
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