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Extending the Bounds of Rationality: Evidence and Theories of Preferential Choice

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  • Jörg Rieskamp
  • Jerome R. Busemeyer
  • Barbara A. Mellers

Abstract

Most economists define rationality in terms of consistency principles. These principles place ?bounds? on rationality?bounds that range from perfect consistency to weak stochastic transitivity. Several decades of research on preferential choice has demonstrated how and when people violate these bounds. Many of these violations are interconnected and reflect systematic behavioral principles. We discuss the robustness of the violations and review the theories that are able to predict them. We further discuss the adaptive functions of the violations. From this perspective, choices do more than reveal preferences; they also reflect subtle, yet often quite reasonable, dependencies on the environment.

Suggested Citation

  • Jörg Rieskamp & Jerome R. Busemeyer & Barbara A. Mellers, 2006. "Extending the Bounds of Rationality: Evidence and Theories of Preferential Choice," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 631-661, September.
    • Handle: RePEc:aea:jeclit:v:44:y:2006:i:3:p:631-661
    Note: DOI: 10.1257/jel.44.3.631
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