do you think the way classical economics models individual decision making (through utility maximization) is flawed...

do you think the way classical economics models individual decision making (through utility maximization) is flawed and should be altered? If so, how?

Expert Solution

Classical economics models assume that people are rational in an approach that utilizes all available actions before taking a decision on achieving their targets. People have rational preferences among the outcomes which can be identified as well as associated with values. People maximize utility and companies maximize profits. Individuals act independently on the basis of relevant and full information. However in reality these assumptions are flawed and need to be altered. The behavioral finance is the application of scientific research on the social, psychological, and emotional contributions to participants in the market and various price trends. Individuals cannot gather the necessary information for making an informed decision, evaluate available alternatives and choose actions which are optimally related to their values and beliefs. The view emphasizes that the people are affected by psychological factors like cognitive biases in decision- making, instead of being rational, utility and wealth maximization; thus these factors must be taken into consideration

Rahul Sunny answered 2 hours ago

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do you think the way classical economics models individual decision making (through utility maximization) is flawed...

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The purpose of economics is to provide a way to think. Economic thinking and decision-making recognize...

In what ways do the classical and administrative models of decision making help managers appreciate the complexities of real-world decision making?

Do you think intuition is respected as a decision making style? Do you think it should...

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