Theory of bounded rationality

and the finite amount of time they have to make a decision • the decision-maker is a satisfier. the cognitive limitations of their minds. .• The idea that in decision-making. rationality of individuals is limited by the information they have. one seeking a satisfactory solution rather than the optimal one.

Theory of mental accounting .

categorize and evaluate economic outcomes • Framing : The way a person subjectively frames a transaction in their mind will determine the utility they receive or expect.• Mental accounting attempts to describe the process whereby people code. .

• There are two values attached to any transaction .Acquisition value is the money that one is ready to part with for physically acquiring some good.. Transaction value is the value one attaches to having a good deal. the transaction utility is positive . . • If the price that one is paying is equal to the mental reference price for the good. the transaction value is zero. If the price is lower than the reference price.acquisition value and transaction value.

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