Rubinstein2005-page50 - but that there are systematic...

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October 21, 2005 12:18 master Sheet number 48 Page number 32 32 Lecture Three The satisfcing procedure, though it is stated in a way that seems unrelated to the maximization oF a preFerence relation or utility Function, can be described as iF the decision maker maximizes a preF- erence relation. I know oF no other examples oF interesting general schemes For choice procedures that satisFy other than the “rational man” and the satisfcing procedures. However, later on, when we discuss consumer theory, we will come across several other appeal- ing examples oF demand Functions that can be rationalized though they appear to be unrelated to the maximization oF a preFerence relation. Psychological Motives Not Included within the Framework The more modern attack on the standard approach to modeling eco- nomic agents comes From psychologists, notably From Amos Tver- sky and Daniel Kahneman. They have provided us with beautiFul examples demonstrating not only that rationality is oFten violated,
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Unformatted text preview: but that there are systematic reasons For the violation resulting From certain elements within our decision procedures. Here are a Few ex-amples oF this kind that I fnd particularly relevant. Framing The Following experiment (conducted by Tversky and Kahneman 1986) demonstrates that the way in which alternatives are Framed may aFFect decision makers’ choices. Subjects were asked to imagine being conFronted by the Following choice problem: An outbreak oF disease is expected to cause 600 deaths in the US. Two mutually exclusive programs are expected to yield the Following results: a. 400 people will die. b. With probability 1/3, 0 people will die and with probability 2/3, 600 people will die. In the original experiment, a diFFerent group oF subjects was given the same background inFormation and asked to choose From the Following alternatives:...
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