Overview

Rational decision making is a theory of a how a rational person or agent would act in any situation. It forms the underpinning of classical economics and is used when designing artificially intelligent agents. Rational agents work from a statistical viewpoint. They consider all the possible outcomes and assign likelihoods to each, then use this information to optimize their decisions.

Real people often dont make choices that aligned with the rational choice. Behavioural decision analysis studies the departures from rationality that people often display.

Frameworks

There have been various frameworks that have been proposed to explain the actual decision making processes that individuals use.

• Prospect Theory
• System 1/System 2

Topics

• Criticisms of Rationality - discusses how well the economics definition of rational decision making models real decisions.
• Behavioural Traps refer to the departures from rationality observed in human decision making that can lead to sub optimal outcomes. Knowledge of the traps is often the first step to being able to mute their effects.