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Rational choice theory provides a framework to explain why groups of rational individuals can come to collectively irrational decisions. For example, while at the individual level a group of people may have common interests, applying a rational choice framework to their individually rational preferences can explain group-level outcomes that ...
Common examples of this relationship include corporate management (agent) and shareholders (principal), elected officials (agent) and citizens (principal), or brokers (agent) and markets (buyers and sellers, principals). [4] In all these cases, the principal has to be concerned with whether the agent is acting in the best interest of the principal.
The agent is given powers to make decisions on behalf of the principal. However, the two parties may have different incentives and the agent generally has more information. The principal cannot directly ensure that its agent is always acting in its (the principal's) best interests. [1]
Looking for some financial advice? Reddit can be a great place to start. Many Reddit communities, like r/PersonalFinance and r/Frugal, contain answers to questions you're probably asking when it ...
However, choices which are made on a person's behalf in their best interest do show a tendency for choice-supportive memory bias. Random selection: People do not show choice-supportive biases when choices are made randomly for them. [12] This is because choice-supportive memory bias tends to arise during the act of making the decision.
In political science, it is the subset of positive political theory that studies self-interested agents (voters, politicians, bureaucrats) and their interactions, which can be represented in a number of ways—using (for example) standard constrained utility maximization, game theory, or decision theory. [1]
In other words, a nudge alters the environment so that when heuristic, or System 1, decision-making is used, the resulting choice will be the most positive or desired outcome. [25] An example of such a nudge is switching the placement of junk food in a store, so that fruit and other healthy options are located next to the cash register, while ...
The Powell-led rate-setting panel will announce a rate decision at the conclusion of its meeting on Wednesday, March 19, 2025, at 2 p.m. ET. ... giving up — for example, 90 days of interest for ...