Other links:

Other links:

Rational Choices: An Ecological Approach

  • Economics Discussion Papers
  • January 2, 2019
  • Abhinash Borah,
  • Abhinash Borah, Christopher Kops

We address the oft-repeated criticism that the demands which the rational choice approach makes on the knowledge and cognition of a decision maker (DM) are way beyond the capabilities of typical human intelligence. Our key ļ¬nding is that it may be possible to arrive at this ideal of rationality by means of cognitively less demanding, heuristic-based ecological reasoning that draws on information about othersā€™ choices in the DMā€™s environment. Formally, we propose a choice procedure under which, in any choice problem, the DM, ļ¬rst, uses this information to shortlist a set of alternatives. The DM does this shortlisting by a mental process of categorization whereby she draws similarities with certain societal membersā€”the ingroupā€”and distinctions from othersā€”the outgroupā€”and considers those alternatives that are similar (dissimilar) to ingroup (outgroup) membersā€™ choices. Then, she chooses from this shortlisted set by applying her preferences, which may be incomplete owing to limitations of knowledge. We show that if a certain homophily condition connecting the DMā€™s preferences with her ingroup-outgroup categorization holds, then the procedure never leads the DM to making bad choices. If, in addition, a certain shortlisting consistency condition holds vis-a-vis non-comparable alternatives under the DMā€™s preferences, then the procedure results in rational choices.

Study at Ashoka

Study at Ashoka