Utility-maximising rationality


Bounded rationality

Axiomisation of utility and subjective probability [16] [17] :

Taking account of the choice context and behavioural process [15] [18] [19] [20] [21] :

- Paradigm of “fully” rational decision & maximizing utility or profit-function

- Axioms of rationality are based on market transparency and total information on behavioral alternatives, relevant attributes and related consequences as well as definite and transitive preferences

- No cognitive limitations in processing attributes and choice alternatives

- Satisficing instead of optimizing criteria

- Individuals do not base choices on time-consistent utility functions over all objects

- Individuals have partial, imperfect biased cognitive representations and use decisional heuristics to cope with choice under uncertainty

- “Framing” decisional context influences the estimation of behavioural consequences