...The primary assumptions of Rational Choice Theory, is the beliefs that “human beings are rational and self-interested beings who are affected by the consequences of their actions” (Miller, 4). It is said that a person considers reason to their actions, such as: opportunities; the results that may come of the actions (advantages), costs, benefits. A person is capable of finding reasons to support their actions or at least try to create something to make them feel like the decision they make is justifiable; “rational choice theorists is not that individuals are purely rational in their decision making, but rather that they do consider the costs and benefits” (Hagan, 116). Miller (2009), said that “various costs and benefits that are considered by the would-be offender are the subjective ones” (p. 8), in other words, a soon to be offender will choose to commit an offense after...
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...The rational choice theory explains that the rational actors will choose to engage in crime rather than non-crime, when the actor perceived net benefits of crime is larger than the perceived net benefits of non-crime (Benson and Simpson 2015,). The rational choice that is conducted because of the influence of the rational actors’ self interest. “Self-interest is the driving force of our society: people tend to try to improve their personal situation (Kirchgassner 2014, 1119 ). Self interest is different for all individuals because their interest is affected by numerous materialistic elements. Simpson and Piquero conducted a research whether low self control contributes to executing a crime. The research indicated that low self control...
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...When to Apply Rational Choice Theory A widely used model to study human behavior, called Rational Choice Theory, helps to simplify social phenomena by assuming these properties: utility maximization, consistency, expected value, individuals as relevant agents, homogeneity, and equilibrium. Almost all social scientists, especially economists, use this model to predict human behavior, and sometimes their results may contradict the actual phenomenon; in other words, they were unaware that their experiments failed to meet one or more of the Rational Choice Theory assumptions. For example, in situations like enlisting in the military and eventually going to war, where individuals fail to maximize utility and contradicts the assumptions of the Rational Choice Theory, applying the theory would be nonsensical. However, when dealing with situations in which individuals behave rationally like sex workers in the prostitution industry, whereby all Rational Choice Theory assumptions are met, the theory explains phenomena exceptionally well. The example of soldiers going into battle clearly contradicts the assumptions necessary for the Rational Choice Theory to hold. By definition, a rational human being would choose the option that gives him the highest level of utility. In deciding to join the military and fight in war, the costs of making this decision heavily outweighs the benefits. Comparatively, this problem resembles the “Voter’s Paradox” in which Anthony Downs explained using a...
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...The Rational Choice theory implies that individuals who commit crimes commit them after contemplating the risks of getting caught and the pending punishment, along with the rewards of accomplishing the criminal act. However, individuals who do not commit a crime decide that accomplishing the criminal act is too risky and not worth the reward. In other words, whether you are a criminal or not, rational thinking takes place, based on this theory. The Deterrence theory implies that if a punishment is severe, certain, and swift enough a would-be criminal will evaluate the gains and losses prior to participating in criminal acts. There are two elements to the Deterrence theory, general deterrence and specific deterrence. General deterrence is intended...
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...In my personal experience as a police officer, I feel some people whom commit crimes do consider the consequences, and some commit crimes due to several factors like impulse and opportunity. Furthermore, the rational choice theory developed by Derek Cornish and Ronald Clarke, assumes that many people consider the risks and rewards of the criminal action (Bohm & Vogel, 2011). Under the rational choice theory all people are not considered rational all the time, therefore, factors that influence the risk and reward outcome of a crime are the individual’s level of self control, moral beliefs, strains, emotional state and association with delinquent peers (Bohm & Vogel, 2011, p. 18). An example of the rational crime theory includes people who...
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...Introduction The theory of bounded rationality is one that been a cause for discussion in economist circles around the world for many years. The theory, originally coined by Hebert Simon surrounded the limitation of humans to process the amount of information available to make a logical, economic decision and the consumer would therefore, settle for something that satisfyingly sufficient, or ‘satisfice’(Simon 1955). Furthermore, the theory expanded over time to also include mans use of heuristics to simplify cognitive effort in the decision making process (Simon and Newell 1972) and it was argued that ‘logical and economic’ decisions were never reached by humans due to emotions and judgement controlling the decision making process and causing a range of biases and errors (Tversky and Kahneman 1986). The theory identified that humans would use these heuristics, such as rule of thumb or an estimation, to find something that is satisfactory to their needs rather than making the ideal economic decision. I agree with the notion that the world is ‘too complex for people to solve problems by employing strict logical rules and comprehensive thought processes’ (Simon 1955) and am also of the belief that humans will rely on heuristics to make the cognitive process more straightforward. Rational Consumer Choice Rational consumer choice theory has been around for many years and stems from the ideal that consumers act in a ‘rational’ fashion when making economic decisions. Not as...
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...commonly drawn between the “historical” and the “rational choice” variants of institutionalism and shows that there are more points of tangency than typically assumed. However, differences remain in how scholars in the two traditions approach empirical problems. The contrast of rational choice’s emphasis on institutions as coordination mechanisms that generate or sustain equilibria versus historical institutionalism’s emphasis on how institutions emerge from and are embedded in concrete temporal processes serves as the foundation for the second half of the essay, which assesses our progress in understanding institutional formation and change. Drawing on insights from recent historical institutional work on “critical junctures” and on “policy feedbacks,” the article proposes a way of thinking about institutional evolution and path dependency that provides an alternative to equilibrium and other approaches that separate the analysis of institutional stability from that of institutional change. INTRODUCTION Institutional analysis has a distinguished pedigree in comparative politics, and the “new” institutionalist literature of the past two decades has both sustained this venerable tradition and deepened our understanding of the role of institutions in political life. At the same time, recent work has given rise to new debates. It is now conventional to distinguish three different varieties of institutionalism: rational choice institutionalism, historical institutionalism, and...
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...consequences that may arise. The rational decisions presuppose the best possible outcome and also reduce chances of potential risks and biases in the decision making process. Despite its accuracy, most everyday life decisions are made by individual’s perceptions due to its high demand in time and bound rationality. The perceptual decision makings are quick-step thinking process and can be effective in everyday activities. However, these perceptual decisions can be impinged upon the perceptual errors or distortions, leading to failure in selecting right decisions. In economic view, these perceptual decisions can be employed by entrepreneurs or managers to increment their assets of the organisations. Therefore manager should concentrate on both rationality and perception to make more appropriate decision making. The rational decision making is a systematic process in identifying problems and generating most logical, effective choice to address the problem. To make rational decisions, the information must be sufficient and reliable, and low on risk level. The decision’s rationality depends on the specification of models, and different models impose different rational decisions. Managers evaluate these rational decisions and select the optimal decision. Marcel (2011, p. 371) states that a real-life decision problems can be framed into different models, which represents different rational decisions that could be made by an individual. He remarks on how rational decision making are effective...
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...Laroche being prescriptive and descriptive Laroche follows a prescriptive method in arguing for decision making theory. He argues it is a social representation which will improve decision making. In his abstract he writes “The paper argues that […] the concept of organizational action should not be opposed to decision and decision-making. Decision and decisionmaking are best understood as social representations […]. As organization members think and act in terms of decision-making, a theory of organizational action cannot simply do without a theory of decision-making. “ showing clearly that he is prescribing a certain way of looking upon decision-making. This is further strengthened in the conclusion where he for example writes “This paper argued that decision-making is best understood as a process of reality creation through organization members’ representations of their own role and activity.” The extent to which Laroche is prescriptive is debatable however. He acknowledges descriptive factors such as when he claims in conclusion that “no theory of action can develop without integrating the fact that, to a significant extent, organizational members think and act in terms of decision-making... a relevant phenomenon for a theory of action, not a marginal one”. He lists examples from empirical studies in describing the decision-making process: “bureaucratic processes (e.g., Cyert and March 1963, Carter 1971), political processes (e.g.. Bower 1970), psychological...
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...Chapter 18 A SURVEY OF BEHAVIORAL FINANCE ° NICHOLAS BARBERIS University of Chicago RICHARD THALER University of Chicago Contents Abstract Keywords 1. Introduction 2. Limits to arbitrage 2.1. Market efficiency 2.2. Theory 2.3. Evidence 2.3.1. Twin shares 2.3.2. Index inclusions 2.3.3. Internet carve-outs 3. Psychology 3.1. Beliefs 3.2. Preferences 3.2.1. Prospect theory 3.2.2. Ambiguity aversion 4. Application: The aggregate stock market 4.1. The equity premium puzzle 4.1.1. Prospect theory 4.1.2. Ambiguity aversion 4.2. The volatility puzzle 4.2.1. Beliefs 4.2.2. Preferences 5. Application: The cross-section of average returns 5.1. Belief-based models 1054 1054 1055 1056 1056 1058 1061 1061 1063 1064 1065 1065 1069 1069 1074 1075 1078 1079 1082 1083 1084 1086 1087 1092 ° We are very grateful to Markus Brunnermeier, George Constantinides, Kent Daniel, Milt Harris, Ming Huang, Owen Lamont, Jay Ritter, Andrei Shleifer, Jeremy Stein and Tuomo Vuolteenaho for extensive comments. Handbook of the Economics of Finance, Edited by G.M. Constantinides, M. Harris and R. Stulz © 2003 Elsevier Science B.V All rights reserved . 1054 5.2. Belief-based models with institutional frictions 5.3. Preferences N. Barberis and R. Thaler 6. Application: Closed-end funds and comovement 6.1. Closed-end funds 6.2. Comovement 7. Application: Investor behavior 7.1. 7.2. 7.3. 7.4. 7.5. Insufficient diversification Naive diversification Excessive trading The selling decision...
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...BOUNDED RATIONALITY Herbert Simon (1916-2001) is most famous for what is known to economists as the theory of bounded rationality, a theory about economic decision-making that Simon himself preferred to call “satisficing”, a combination of two words: “satisfy” and “suffice”. Contrary to the tenets of classical economics, Simon maintained that individuals do not seek to maximise their benefit from a particular course of action (since they cannot assimilate and digest all the information that would be needed to do such a thing). Not only can they not get access to all the information required, but even if they could, their minds would be unable to process it properly. The human mind necessarily restricts itself. It is, as Simon put it, bounded by “cognitive limits”. Hence people, in many different situations, seek something that is “good enough”, something that is satisfactory. Humans, for example, when in shopping mode, aspire to something that they find acceptable, although that may not necessarily be optimal. They look through things in sequence and when they come across an item that meets their aspiration level they go for it. This real-world behaviour is what Simon called satisficing. He applied the idea to organisations as well as to individuals. Managers do much the same thing as shoppers in a mall. “Whereas economic man maximises, selects the best alternative from among all those available to him,” he wrote, “his cousin, administrative man, satisfices, looks for a course...
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...Monique McCloskey SHAY140 Criminology: Theory and Practice: Assessment 2 ESSAY Tutor: Patricia Aloi Student number: 9889000. 03 June 2013 A little girl was two when the physical and sexual abuse commenced at her day care centre in Victoria, Australia. The abuse carried on until she turned four and was perpetrated by a fellow female class mate several months older than her. The victim suffered beatings, being strangled and forced to undress during the yearlong abuse. Sexual assault was perpetrated which included being licked on her body and face as well as having objects used during her ordeal. Severe separation anxiety, nightmares, low self-esteem, difficulty learning and concentrating are regular emotions and reactions experienced by the victim as reported by her mother. A psychologist have examined the victim and found that she is experiencing extremely high anxiety levels. Due to the age of the alleged attacker the police did not commence an investigation. Research into peer to peer sexual violence has been deficient and there is no clear evidence to determine the prevalence of sexual assault in day care centres or schools. Child sexual abuse is defined as abuse that take place when an “adult, stronger child or adolescent uses his or her power or authority to involve a child in sexual activity. Sexual abuse can be physical, verbal or emotional”. It is clear by the description of events that sexual abuse occurred. Department of Communities, (2013), www.communities...
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...need strategies to sustain loyal customers. Many believe that the amount of truth consumers place in companies might be abused, as loyalty sometimes equals strong dependence on suppliers. However, government’s role is to protect their citizens and prevent any actions that might violate ethics, but otherwise, the economy will be better off without intervention, referring to the belief of “Laissez-Faire” (Frank & Cartwright, 2013). The essay will aim to prove that loyalty does not cause overly-dependence if it does not influence ethics, and that consumers will seek for better option for themselves. The rational choice theory, which is the base of the microeconomic studies, states that individuals act rationally and choose the option that will provide them with the highest level of satisfaction (Frank & Cartwright, 2013). This theory resembles the fact that consumers are rational and their decision will always aim to yield the highest possible utility. This basically means that customers can only become loyal if the company puts an effort to maximize satisfaction and utility of their customers. Take another point, if the...
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...THEORY Deprivation is distinguishable into relative and absolute deprivation. Physical abuse, starvation, and poverty are seen as forms of absolute deprivation, whereas relative deprivation can be defined as the discrepancy between what one expects in life and what one gets. Both absolute and relative deprivation are causes of the deprived one's receptivity to particular (religious) messages: "Come to me, all you who labor and are heavy laden, and I will give you rest" (St Matthew 11:28). Deprivation was seen by generations of scholars, not necessarily Marxists, as the cause of both personal religious commitment and sect and cult formation. The German scholars Max Weber and Ernst Troeltsch were pioneers with regard to the relationships between sect and church membership, and social class and status group. In The Social Sources of Denominationalism (Holt 1929), H. Richard Niebuhr saw sects as the "churches of the disinherited"; because of their lack of economic and political power, the less privileged needed religion most, and sects and cults could provide their members with compensation for the lack of social and personal success. In the 1950s and 1960s, much theorizing centered on the construction of typologies. This was also the case in deprivation theory. For example, Charles Glock (1964, Glock and Stark 1965) distinguished five types of deprivation, depending on the kinds of strain felt: economic, social, organismic, ethical, and psychic deprivation. Every type gave rise...
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...PDF hosted at the Radboud Repository of the Radboud University Nijmegen This full text is a publisher's version. For additional information about this publication click this link. [http://hdl.handle.net/2066/19379] Please be advised that this information was generated on 2012-09-19 and may be subject to change. Buying Impulses: A Study on Impulsive Consumption Astrid Gisela Herabadi Buying Impulses: A Study on Impulsive Consumption Astrid Gisela Herabadi PrintPartners Ipskamp ISBN 90-9017360-9 Cover illustration: A part of the stone-reliefs in “Candi Borobudur” Buying Impulses: A Study on Impulsive Consumption Een wetenschappelijke proeve op het gebied van the Sociale Wetenschappen Proefschrift ter verkrijging van de graad van doctor aan de Katholieke Universiteit Nijmegen op gezag van de rector magnificus Prof.dr.C.W.P.M. Blom, volgens besluit van het College van Decanen in het openbare te verdedigen op woensdag 17 december 2003, des namiddags om 1.30 uur precies door Astrid Gisela Herabadi geboren te Bogor op 30 december 1969 Promotores: Prof. dr. B. Verplanken (University of Tromsø, Norway) Prof. dr. A.F.M. van Knippenberg Manuscriptcommissie: Prof. dr. J.A.J.P. Janssen Prof. dr. N.K. de Vries (Universiteit Maastricht) Prof. dr. M. Zeelenberg (Universiteit van Tilburg) Buying Impulses: A Study on Impulsive Consumption A scientific essay in Social Sciences Doctoral thesis to obtain the degree of doctor from the...
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