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Models Of Irrational Behaviour Of Household And Firm

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  • Krstic, Bojan
  • Krstic, Milos

Abstract

To study the basic characteristics of impulsive household, economists use probabilistic different models, These models are stylized and lack many details. Despite the fact that these models lack realism, studying these models will enable economists to see what is really important for them. For example, increasing the relative price of commodity X decrease the consumption of commodity X. The model of irrational household behaviour indicates that the irrational economic subjects will be forced to behave as-if rational, i.e. that their behaviour is consistent with the fundamental theorem of rationality of traditional economic science that states: demand curve of rational household have a negative slope. Also, The model of irrational household behaviour indicates that a large number of independent impulsive households gravitate toward the point p, which represents the best of choice. This theory is true for irrational firms.

Suggested Citation

  • Krstic, Bojan & Krstic, Milos, . "Models Of Irrational Behaviour Of Household And Firm," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 61(4), pages 1-10.
    • Handle: RePEc:ags:sereko:240762
    DOI: 10.22004/ag.econ.240762
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    References listed on IDEAS

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    1. Geoffrey M Hodgson, 2012. "On the Limits of Rational Choice Theory," Economic Thought, World Economics Association, vol. 1(1), pages 1-5, July.
    2. Geoffrey M. Hodgson, 2006. "Economics in the Shadows of Darwin and Marx," Books, Edward Elgar Publishing, number 3925.
    3. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58(3), pages 211-211.
    4. Herbert A. Simon, 1991. "Bounded Rationality and Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 125-134, February.
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    Cited by:

    1. Eka Sudarmaji & Noer Azam Achsani & Yandra Arkeman & Idqan Fahmi, 2022. "Decomposition Factors Household Energy Subsidy Consumption in Indonesia: Kaya Identity and Logarithmic Mean Divisia Index Approach," International Journal of Energy Economics and Policy, International Journal of Energy Economics and Policy, vol. 12(1), pages 355-364.
    2. Eka Sudarmaji & Noer Azam Achsani & Yandra Arkeman & Idqan Fahmi, 2021. "Can Energy Intensity Impede the CO2 Emissions in Indonesia? LMDI-Decomposition Index and ARDL: Comparison between Indonesia and ASEAN Countries," International Journal of Energy Economics and Policy, International Journal of Energy Economics and Policy, vol. 11(3), pages 308-318.

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