Magni, Carlo Alberto (2007): Investment decisions, equivalent risk and bounded rationality.
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The Net Present Value maximizing model shows fallacies and inconsistencies that may be easily unmasked by performing a cognitive analysis of the decision-making process implied by the maximization problem. The model may be conveniently rescued if the maximizing version of the criterion is shunt aside and a boundedly rational interpretation is given. The resulting ‘mixed strategy’, currently in use by many real-life decision makers, opens up terrain to a fruitful cooperation between bounded and unbounded rationality. This paper is consistent with a fluid and nondichotomous interpretation of dual-process theories.
|Item Type:||MPRA Paper|
|Original Title:||Investment decisions, equivalent risk and bounded rationality|
|Keywords:||Finance, Investment decisions, Net Present Value, heuristics, bounded rationality, cognition|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B40 - General
G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity
A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M20 - General
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
|Depositing User:||Carlo Alberto Magni|
|Date Deposited:||03. Dec 2007 18:38|
|Last Modified:||21. Feb 2013 02:15|
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Available Versions of this Item
Investment decisions, equivalent risk and bounded rationality. (deposited 03. Dec 2007 18:38)
Investment decisions, net present value and bounded rationality. (deposited 05. Mar 2008 13:06)
- Investment decisions, equivalent risk and bounded rationality. (deposited 21. Feb 2009 16:15)
- Investment decisions, net present value and bounded rationality. (deposited 05. Mar 2008 13:06)