rationality
the quality of thinking or acting in a logical and sensible way
The quality of being sensible, logical, and based on reason rather than emotion, impulse, or superstition.
the ability to think clearly and make decisions for logical reasons
The mental capacity to think logically, form judgments, and make decisions on the basis of reasons.
the economic idea that people make choices that consistently serve their goals or interests
In economics and decision theory, the principle or assumption that people choose consistently in ways that best satisfy their preferences or goals, given the information they have.
- Base: rationality
- Plural: rationalities, rationality
bounded rationality
1limited rational decision-making
the idea that people make the best decision they can, but their knowledge and thinking time are limited
- The company used the concept of bounded rationality to explain why managers sometimes choose a satisfactory option rather than the best possible one.
- Bounded rationality helps explain why consumers do not always compare every available product.
- In real markets, bounded rationality is often more realistic than the assumption of perfect information.
- Bounded rationality means people cannot think about every option.
- The manager made a good-enough choice because of bounded rationality.
economic rationality
1self-interested economic reasoning
making choices mainly to get the best economic result
- From the viewpoint of economic rationality, closing the factory saved the company money.
- The policy was criticized for treating economic rationality as more important than social welfare.
- Consumers do not always behave according to simple economic rationality.
- Economic rationality focuses on costs and benefits.
- The decision made sense as economic rationality.
instrumental rationality
1efficient means-end reasoning
thinking logically about how to reach a goal, without asking whether the goal is right
- Instrumental rationality can explain why the strategy worked, but it cannot show whether the goal was ethical.
- The debate contrasted instrumental rationality with moral reasoning.
- A purely instrumental rationality may value efficiency over human needs.
- Instrumental rationality asks, 'What is the best way to reach this goal?'
- It does not ask if the goal is good.
rationality assumption
1assumption of rational behavior
the idea in a model that people or companies will make logical choices that support their goals
- The rationality assumption makes the model easier to analyze but less realistic.
- Behavioral economics challenges the rationality assumption in traditional theory.
- The forecast depends heavily on a strong rationality assumption about consumers.
- The rationality assumption says people choose logically.
- The model uses a rationality assumption.