A piece of evidence regarding the full rationality of economic agents

Article Abstract:

Economic analyses may assume full rationality, yet most economists assume that humans may not take economic decisions in ways that are fully rational. One example can illustrate behavior that is not rational, and this involves choosing library photocopying cards. The card allowing the largest number of photocopies to be made did not offer best value, and this could be easily calculated. Sales of this card did not drop after the price changes were made that resulted in its being poor value. This evidence indicates that changes in economic possibilities do not give rise to a prompt reaction.

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Views and comments on cognition, rationality and institutions

Article Abstract:

Institutions involve shared rules and constrain behavior. Cognition relates to the perception and processing of information, and rationality relates to a model of human cognition. Institutions are increasingly seen as important. They can reduce uncertainty and both help us process information and affect how we perceive it. Rationality can be best understood if there is an explicit focus on cognition, and this helps us to understand institutional change. More research is needed on how institutions, rationality and cognition interact with each other.

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Near rationality in a principal-agent framework

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Near rational agents' behavior is examined where constraints exist, as with relationships between principals and agents, and there is asymmetric information.

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