The rationality of irrational decisions: A new perspective of behavioral economics
Mar 22, 2019
Published in: Int. J. Economics and Business Research
Publisher: Inderscience Enterprises Ltd.
This paper is an attempt to contribute to the field of behavioral economics by proposing a new perspective of utility and rational decision making. We use the method of Thought Experiment, as well as, hypothetical examples of decision making to explain the rationality of decisions that might be seen by economics as irrational. We hypothesize that all decisions are rational at the individual level, and that all decisions are justified by decision makers and maximize the decision maker’s perceived utility. To do this, we redefine rationality at the decision maker’s level, and we explain how individuals customize rationales for their own actions to make decisions that maximize their perceived utility. We also redefine utility to include both tangible and intangible dimensions, and we discuss how the customization of rationales and the perception of utility at the individual level make all decisions rational. We also propose a model to hypothetically calculate full utility attainment (maximum utility) by the individual.