Even Distorted Choices can be Rational
When asked to choose between available options, not every subject follows the expected utility model. Some choices may appear to be quite random: why does an individual who says he prefers food A to food B end up choosing the latter? In his ERC-funded project Static and Dynamic Decision Making under Uncertainty: Theory and Applications, hosted by IGIER - Innocenzo Gasparini Institute for Economic Research, Simone Cerreia-Vioglio (Department of Decision Sciences) aims to develop a model of where a random choice is due not to a mistake or a change in utility, but because a conscious decision to randomize.
"When individuals are unsure about their own preferences, for instance, we can observe violations of the principles of transitivity and independence that govern rational choices. Even the principle of differentiation, i.e. the preference for variety that causes random choices, can be reduced to rational principles".
In another strand of the project, Cerreia-Vioglio intends to study ambiguity in dynamic contexts, whereas it has been studied so far in atemporal contexts. "The research in micro- and macro-economy can benefit from a better understanding of these phenomena and from the development of a model that includes several distorting factors and connects different concepts in Decision Theory".
Read here the other articles on the ERC research projects:
The Dream Team of Research made in..ERC
University at the Time of Star Wars
The Culture That Influences Demography
For a History of Inequality in Europe
Fostering Solidarity in Times of Migrations
A Theory of Games and Emotions
Why with Broadband We will have More Children
How to Communicate Climate Science
At the Birth of Maritime Insurance
The Psychology of Economic Behavior
Great Expectations for Great Objectives
What we are Certain about Uncertainty
Putting a Halt to the Spread of Infections
Wellbeing and Fertility, a Two-Way Relationship
The Role of Financial Imperfections
The World Through the Lens of Power
The Selection of the Political Class
How to Evaluate Innovative Ideas
A Help for Those who make Predictions
When a Government is Guided by Values