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Rational Roots Of "Irrational" Behavior: New Theories Of Economic Decision-Making


  • Opaluch, James J.
  • Segerson, Kathleen


The neoclassical paradigm has proven to be a rich approach for evaluating a variety of issues for individual and social decision-making. However, an increasing body of literature suggests that actual behavior systematically violates the neoclassical utility model. This paper reviews a number of alternative models for decision-making. Results from the literature show several examples of apparently "irrational" behavior that can be explained in terms of these alternative motivations. The paper also extends the received literature by examining in some detail the implications of one such model which is based on the psychological feeling of ambivalence. The paper demonstrates that ambivalence has the potential for explaining the appearance of intransitive choices, the use of rules of thumb in decision-making and the large discrepancies between stated willingness-to-pay and willingness-to-accept, all of which have been observed in various settings. There are potentially great rewards from innovative research that expands the neoclassical paradigm to incorporate additional motivational factors in decision-making.

Suggested Citation

  • Opaluch, James J. & Segerson, Kathleen, 1989. "Rational Roots Of "Irrational" Behavior: New Theories Of Economic Decision-Making," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 18(2), October.
  • Handle: RePEc:ags:nejare:28875

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    References listed on IDEAS

    1. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
    2. Gregory, Robin, 1986. "Interpreting measures of economic loss: Evidence from contingent valuation and experimental studies," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 325-337, December.
    3. W. Michael Hanemann, 1984. "Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(3), pages 332-341.
    4. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-563, June.
    5. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151-151.
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    Cited by:

    1. Christian A. Vossler & Robert G. Ethier & Gregory L. Poe & Michael P. Welsh, 2003. "Payment Certainty in Discrete Choice Contingent Valuation Responses: Results from a Field Validity Test," Southern Economic Journal, Southern Economic Association, vol. 69(4), pages 886-902, April.
    2. Poe, Gregory L. & Vossler, Christian A., 2009. "Consequentiality and contingent values: an emerging paradigm," MPRA Paper 38864, University Library of Munich, Germany.
    3. Swallow, Stephen K., 1996. "Economic Issues in Ecosystem Management: An Introduction and Overview," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(02), pages 83-100, October.
    4. Hayes, William M. & Lynne, Gary D., 2004. "Towards a centerpiece for ecological economics," Ecological Economics, Elsevier, vol. 49(3), pages 287-301, July.
    5. Chorus, Caspar G., 2015. "Models of moral decision making: Literature review and research agenda for discrete choice analysis," Journal of choice modelling, Elsevier, vol. 16(C), pages 69-85.
    6. Peter Groothuis & John Whitehead, 2002. "Does don't know mean no? Analysis of 'don't know' responses in dichotomous choice contingent valuation questions," Applied Economics, Taylor & Francis Journals, vol. 34(15), pages 1935-1940.
    7. Rosenberger, Randall S. & Peterson, George L. & Clarke, Andrea & Brown, Thomas C., 2003. "Measuring dispositions for lexicographic preferences of environmental goods: integrating economics, psychology and ethics," Ecological Economics, Elsevier, vol. 44(1), pages 63-76, February.
    8. Mandy Ryan & Fernando San Miguel, 2003. "Revisiting the axiom of completeness in health care," Health Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 295-307.
    9. Santos, Julie I. & Uchida, Emi & Anderson, Christopher M. & Swallow, Stephen K., 2013. "Sources of Hypothetical Bias in Public Goods Experiments: A Disaggregated Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150389, Agricultural and Applied Economics Association.
    10. Gelso, Brett R. & Peterson, Jeffrey M., 2005. "The influence of ethical attitudes on the demand for environmental recreation: incorporating lexicographic preferences," Ecological Economics, Elsevier, vol. 53(1), pages 35-45, April.
    11. Kim, Seon-Ae & Gillespie, Jeffrey M. & Paudel, Krishna P., 2008. "Rotational grazing adoption in cattle production under a cost-share agreement: does uncertainty have a role in conservation technology adoption?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), September.
    12. Mooreland, Jay, II, 2011. "The Irrational Investor’s Risk Profile," Master's Theses 107787, University of Minnesota, Department of Applied Economics.
    13. Iovanna, Richard & Newbold, Stephen C., 2007. "Ecological sustainability in policy assessments: A wide-angle view and a close watch," Ecological Economics, Elsevier, vol. 63(4), pages 639-648, September.


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