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Comparative Decision Making$
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Thomas R. Zentall and Philip H. Crowley

Print publication date: 2013

Print ISBN-13: 9780199856800

Published to Oxford Scholarship Online: May 2013

DOI: 10.1093/acprof:oso/9780199856800.001.0001

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Economic Decisions and Institutional Boundaries

Economic Decisions and Institutional Boundaries

Chapter:
(p.7) Chapter 2 Economic Decisions and Institutional Boundaries
Source:
Comparative Decision Making
Author(s):

Evelyn Korn

Johannes Ziesecke

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199856800.003.0002

Microeconomics is one of the oldest and best-developed approaches to understanding decision making and is thus a fitting topic to begin this survey. The authors present Homo economicus, the perfectly rational decision maker, and confront him with institutions, the rules constraining his choices. Hamlet, perhaps the most famous equivocator in all literature, is likewise faced with various conundrums here. Who makes decisions anyway, and what is the basis for making them? This leads to Bentham’s concept of individual utility, updated by Samuelson’s empirical notion of revealed preferences that evades the problem of establishing intentionality. It emerges that separating the intrinsic motivation of the decision maker from external enforcement mechanisms is almost impossible in the revealed-preferences framework. Microeconomists are increasingly concerned about understanding the biases and limitations of human reasoning that give rise to the concept of bounded rationality.

Keywords:   microeconomics, Homo economicus, Bentham, individual utility, Samuelson, revealed preferences, intentionality, bounded rationality

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