A BEHAVIORAL MODEL OF RATIONAL CHOICE

Abstract

Traditional economic theory postulates an "economic man," who, in the course of being "economic" is also "rational." This man is assumed to have knowledge of the relevant aspects of his environ- ment which, if not absolutely complete, is at least impressively clear and voluminous. He is assumed also to have a well-organized and stable system of preferences, and a skill in computation that enables him to calculate, for the alternative courses of action that are avail- able to him, which of these will permit him to reach the highest attainable point on his preference scale. Recent developments in economics, and particularly in the theory of the business firm, have raised great doubts as to whether this schematized model of economic man provides a suitable foundation on which to erect a theory — whether it be a theory of how firms do behave, or of how they "should" rationally behave