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Economic decision making then becomes a problem of maximizing this utility function, subject to constraints (e.g. a budget). This has many advantages. This has many advantages. It provides a compact theory that makes empirical predictions with a relatively sparse model - just a description of the agent's objectives and constraints.
An example of behaviour inhibited by heuristics can be seen when comparing the cognitive strategies utilised in simple situations (e.g. tic-tac-toe), in comparison to strategies utilised in difficult situations (e.g. chess). Both games, as defined by game theory economics, are finite games with perfect information, and therefore equivalent. [10]
Research from a wide range of disciplines including psychology, [9] cognitive science, [10] neuroscience, [11] and economics, [12] suggest that humans have limited cognitive resources that can be used at any given time, when resources are allocated to one task, the resources available for other tasks will be limited. Given that attention is a ...
Behavioral economics was the first subfield to emerge to account for these anomalies by integrating social and cognitive factors in understanding economic decisions. Neuroeconomics adds another layer by using neuroscience and psychology to understand the root of decision-making.
Scarcity heuristic: A cognitive bias where people assign greater value to items or events that are perceived to be in limited supply. This mental shortcut assumes that limited availability signals higher worth, leading individuals to overvalue things that are harder to obtain as exemplified in behavioral economics. [54]
The Limited Capacity Model of Motivated Mediated Message Processing or LC4MP is an explanatory theory that assumes humans have a limited capacity for cognitive processing of information, as it associates with mediated message variables; moreover, they (viewers) are actively engaged in processing mediated information [1] Like many mass communication theories, LC4MP is an amalgam that finds its ...
There's a big difference between the "average" married couple and the "above-average" ones. While some are figuring out how to balance a budget, others plan early retirements, buy vacation homes ...
The term cognitive miser was first introduced by Susan Fiske and Shelley Taylor in 1984. It is an important concept in social cognition theory and has been influential in other social sciences such as economics and political science. [2] People are limited in their capacity to process information, so they take shortcuts whenever they can. [2]