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2017 | OriginalPaper | Chapter

3. Decision-Making—Rational, Bounded, or Behavioral

Authors : Ted Lindblom, Taylan Mavruk, Stefan Sjögren

Published in: Proximity Bias in Investors’ Portfolio Choice

Publisher: Springer International Publishing

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Abstract

This chapter covers decision-making under uncertainty. The main focus is on economic reasoning and the properties of expected utility functions. The chapter discusses and exemplifies alternative ways in which an investor may form decisions under uncertainty. To be rational in its simplest form implies that individuals know their preferences, can identify their options and assign probabilities for each possible outcome. In this chapter we discuss what happens if we relax these assumptions and instead describe decision making as rationally bounded, governed by heuristics or behaviorally rooted.

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Metadata
Title
Decision-Making—Rational, Bounded, or Behavioral
Authors
Ted Lindblom
Taylan Mavruk
Stefan Sjögren
Copyright Year
2017
Book
Proximity Bias in Investors’ Portfolio Choice

Print ISBN: 978-3-319-54761-9

Electronic ISBN: 978-3-319-54762-6

Copyright Year: 2017

DOI
https://doi.org/10.1007/978-3-319-54762-6_3