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A model of decision making in an ecologically realistic environment: Relative comparison and the Independence of Irrelevant Alternatives

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  • Avi Waksberg

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  • Andrew Smith
  • Martin Burd
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    Abstract

    Models of behavior in a variety of areas often assume that decision-makers will adhere to the axioms of economic rationality. This requires that outcomes can be assigned objective values by stable evaluation frameworks. Yet both human and animal behavior is often not economically rational. Instead relative comparison of options is often used to assess value. We are interested in conditions that might lead natural selection to favor relative comparison of options over behavior that is consistent with the axioms of rationality. We compare an economically rational strategy with a relative comparison strategy (trade-off contrast). We model these strategies in a simple environment where decisions are multi-period; there is stochastic fluctuation in the choices available at any given time; and uncertainty about what choices will be available in the future. We investigate five levels of interaction between the attributes of the options that range from perfect complementarity to perfect substitutability. Our results show that, for some of the parameter space, a non-rational strategy achieved higher fitness than an economically rational strategy and that these differences were large enough to be biologically significant. Copyright Springer Science+Business Media, LLC. 2012

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    File URL: http://hdl.handle.net/10.1007/s10818-011-9125-x
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Bioeconomics.

    Volume (Year): 14 (2012)
    Issue (Month): 3 (October)
    Pages: 197-215

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    Handle: RePEc:kap:jbioec:v:14:y:2012:i:3:p:197-215

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    Web page: http://www.springerlink.com/link.asp?id=103315

    Related research

    Keywords: Rationality; Independence of Irrational Alternatives; Complementary resources; Prospect theory; Feeding behavior; Choice theory; A1; B4; D8;

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    References

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    1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    2. Konstantinos Katsikopoulos & Gerd Gigerenzer, 2008. "One-reason decision-making: Modeling violations of expected utility theory," Journal of Risk and Uncertainty, Springer, vol. 37(1), pages 35-56, August.
    3. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
    4. Vernon L. Smith, 2003. "Constructivist and Ecological Rationality in Economics," American Economic Review, American Economic Association, vol. 93(3), pages 465-508, June.
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    7. Cosmides, Leda & Tooby, John, 1994. "Better than Rational: Evolutionary Psychology and the Invisible Hand," American Economic Review, American Economic Association, vol. 84(2), pages 327-32, May.
    8. 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.
    9. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February.
    10. M. Keith Chen & Venkat Lakshminarayanan & Laurie R. Santos, 2006. "How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 517-537, June.
    11. Amos Tversky & Itamar Simonson, 1993. "Context-Dependent Preferences," Management Science, INFORMS, vol. 39(10), pages 1179-1189, October.
    12. Arthur J. Robson, 2002. "Evolution and Human Nature," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 89-106, Spring.
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