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The Concept of Rationality in Neoclassical and Behavioural Economic Theory

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  • Alexandr Soukup
  • Mansoor Maitah
  • Roman Svoboda

Abstract

Theories that are based on the neoclassical basis such as expected utility theory or the theory of efficient markets assume rational choice of subjects in the sense of an optimal choice according to the criteria of neo-classical economics. Behavioral theory such as prospect theory assumes limited rationality in the choice of subjects. In this research the problem of choosing subjects is treated differently. The aim of this paper is to attempt a comparison between two basic approaches of contemporary economic theories that are applied in the financial markets, but also in other spheres of economic activity (public economics). Â

Suggested Citation

  • Alexandr Soukup & Mansoor Maitah & Roman Svoboda, 2015. "The Concept of Rationality in Neoclassical and Behavioural Economic Theory," Modern Applied Science, Canadian Center of Science and Education, vol. 9(3), pages 1-1, March.
    • Handle: RePEc:ibn:masjnl:v:9:y:2015:i:3:p:1
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    References listed on IDEAS

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    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
    3. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, April.
    4. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
    5. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    6. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages 251-278, October.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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