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The two-model problem in rational decision making

Author

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  • Marcel Boumans

    (University of Amsterdam, The Netherlands, m.j.boumans@uva.nl)

Abstract

A model of a decision problem frames that problem in three dimensions: sample space, target probability and information structure. Each specific model imposes a specific rational decision. As a result, different models may impose different, even contradictory, rational decisions, creating choice ‘anomalies’ and ‘paradoxes’. So, decision making in real-life situations is different from decision making in an experiment. An experiment is a designed setting according to an experimenter’s model of the decision problem, while for a real-life situation it is not always obvious what the design is. A subject in an experiment may initially have a different model of the task than the experimenter and thus possibly make apparently irrational decisions from the experimenter’s model perspective. As a consequence a choice anomaly can be eliminated by learning what the experiment’s model is.

Suggested Citation

  • Marcel Boumans, 2011. "The two-model problem in rational decision making," Rationality and Society, , vol. 23(3), pages 371-400, August.
    • Handle: RePEc:sae:ratsoc:v:23:y:2011:i:3:p:371-400
    DOI: 10.1177/1043463111414123
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    References listed on IDEAS

    as
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    3. Brain Kluger & Daniel Friedman, 2006. "Financial Engineering and Rationality: Experimental Evidence Based on the Monty Hall Problem," Labsi Experimental Economics Laboratory University of Siena 007, University of Siena.
    Full references (including those not matched with items on IDEAS)

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