Lec11_F03_mine - CLASS #11: RATIONAL CHOICE THEORY I....

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CLASS #11: RATIONAL CHOICE THEORY I. Rational Choice A. Two Important Assumptions 1. Explain Behavior 2. Behavior is the result of choice B. Rational Actors 1. Introduction a. Consider people and the objects of their desires (what motivates people to act) b. Consider people in isolation (1) Intrinsically motivated by private desires (2)Rational people are motivated by urge to fulfill desire c. Fulfilling desires involves using up resources which are in limited supply (1)Some desires cannot be reached at all due to resource constraints (2)Other desires can only be partially met 2. Making Choices a. At any given point, a person will have private desires and will confront a world that offers opportunities for, as well as contraints upon, the realization of those desires. b. Raw materials of choice (1) Actions – alternatives available to all people; Usually face more than one alternative (2) Outcomes or consequences – each action has one or more outcomes (3) Value – individual can attach value to each consequence/outcome (4) Choice – choose the alternative with the highest value 3. Intrinsic and Instrumental Desires a. Intrinsic desires are those that are valued for their own sake b. Instrumental desires attaches value to things that help a person gain those things that are valued intrinsically
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C. Rational Choice 1. Look for a core set of assumptions a. in the form of laws b. that can be defined in reference to a single individual as opposed to a collection of individuals c. help to understand why people choose certain alternatives d. provide a foundation for explanation 2. Choosing between goals a. At any point in time, each individual will be faced with a choice between a number of different course of actions – alternatives b. Alternatives must be perceived c. people are bundles of preferences about the world of alternatives available to them d. the preferences are related to the consequences of the alternatives e. Assume – people behave as if they sort out and logically arrange the alternatives f. Assume – given a choice of alternatives, person will choose in accord with preferences (tied to their goals) g. A person is rational if they behave in this way 3. Structure of Preferences a. Binary – compare two things at a time b. Non Probabalisitic – they will under the same set of circumstances always prefer one outcome to another c. Connectedness – either aPb bPa or aIb d. Transitivity – guarantee that person will be able to arrange things in order from most preferred to least preferred e. Forced Choice -- Do Nothing is always an alternative to insure choice from a set of alternatives, we must exhaust the possibilities f. Nonperversity – we assume the preferred choice is chosen; if xPy, then y will not be chosen 4. Rationality
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a. When people have the following characteristics, they are
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This note was uploaded on 04/21/2008 for the course PLS 200 taught by Professor Idk during the Fall '08 term at Michigan State University.

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Lec11_F03_mine - CLASS #11: RATIONAL CHOICE THEORY I....

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