Wednesday, August 17, 2016

Rationality assumption and bounded rationality assupmtion


In the rationality assumption, people would make a decision in order to avoid being worse off in that they know what would give them a penalty. On the other hand, it would be hard to prevent themselves from leaving the things that make them worse off. The information they have, the cognitive limitation, and the amount of time are limited. Instead, people use simple rules of thumb in making economic decisions.

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