Marketing Papers

Document Type

Journal Article

Date of this Version

9-2006

Publication Source

Journal of Economic Literature

Volume

44

Issue

3

Start Page

631

Last Page

661

DOI

10.1257/jel.44.3.631

Abstract

Most economists define rationality in terms of consistency principles. These principles place "bounds" on rationality—bounds that range from perfect consistency to weak stochastic transitivity. Several decades of research on preferential choice has demonstrated how and when people violate these bounds. Many of these violations are interconnected and reflect systematic behavioral principles. We discuss the robustness of thes violations and review the theories that are able to predict them. We further discuss the adaptive functions of the violations. From this perspective, choices do more than reveal preferences; they also reflect subtle, yet often quite reasonable, dependencies on the environment.

Copyright/Permission Statement

Copyright © 2006 the American Economic Association.

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Date Posted: 15 June 2018

This document has been peer reviewed.