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The rationality of irrational decisions: a new perspective of behavioural economics

Author

Listed:
  • Mahmoud Yousef Askari
  • Ghaleb A. El Refae

Abstract

This paper is an attempt to contribute to the field of behavioural economics by proposing a new perspective of utility and rational decision making. We use the method of thought experiment, as well as, hypothetical examples of decision making to explain the rationality of decisions that might be seen by economics as irrational. We hypothesise that all decisions are rational at the individual level, and that all decisions are justified by decision makers and maximise the decision maker's perceived utility. To do this, we redefine rationality at the decision maker's level, and we explain how individuals customise rationales for their own actions to make decisions that maximise their perceived utility. We also redefine utility to include both tangible and intangible dimensions, and we discuss how the customisation of rationales and the perception of utility at the individual level make all decisions rational. We also propose a model to hypothetically calculate full utility attainment (maximum utility) by the individual.

Suggested Citation

  • Mahmoud Yousef Askari & Ghaleb A. El Refae, 2019. "The rationality of irrational decisions: a new perspective of behavioural economics," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 17(4), pages 388-401.
    • Handle: RePEc:ids:ijecbr:v:17:y:2019:i:4:p:388-401
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