SGIA2361: Modelling Basics I

Rationality & Choice

Dr. Patrick M Kuhn

11th October 2022
p.m.kuhn@durham.ac.uk

School of Government and International Affairs

Some Housekeeping

• Please complete the Group Formation Survey as soon as

possible, so that we can get groups formed as soon as possible.

• Group Formation Survey Deadline: 20th October 2023

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Today’s Agenda

Quick Refresher

How Reasonable are those Preference Axioms?

Common Critiques of the Rational Choice Framework

Application of Rational Decision-Making: Hilary’s 2008 Choice

Take Home Message and Outlook

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Quick Refresher
Definition of Rationality

Individual i has rational preferences over a given set of outcomes if

and only if they are both complete and transitive.

Completeness (Comparability)
A preference ordering is complete if and only if for any two
outcomes x and y and individual prefers x to y, prefers y to x,
or is indifferent between the two.

Transitivity
For any three outcomes x, y, and z, if x is preferred to y, and
y is preferred to z, then x must be preferred to z.

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Choice Paradigm, Ordinal-, and Interval-Scaled Preferences

(Constrained) Maximization as choice principle:

Choice =max f (Outcomes |Preferences, Constraints)

The pre-lecture video also covered:

• The transformation of ordinal-scaled preference ordering into

interval-scaled utilities
• The parametrization of payoffs to achieve utility functions
(general preference rules)
• The modelling of uncertainty over outcomes via lotteries
(convex combinations of outcomes)

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Two Additional Axioms: Independence and Continuity

Independence:
Let p 2 [0, 1] and x, y, and z be outcomes (or probability dis-
tributions over outcomes). Then actor i prefers x to y if and
only if he prefers px + (1 p)z to py + (1 p)z.
Continuity:

Suppose and actor prefers x to y and y to z. Then there exists

a unique p 2 (0, 1) such that I am indifferent between the
lottery px + (1 p)z and y with certainty.

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How Reasonable are those
Preference Axioms?
How Reasonable are those Preference Axioms?

How reasonable are completeness, transitivity, independence, and

continuity?

In pairs or triplets discuss for about 10min how likely you think the
average Joe/Jane is to hold complete, transitive, independent,
and/or continuous preferences? Start by
1. defining what a violation of each axiom would look like in
practice.
2. Then discuss how frequent such violations might be, and
3. whether they are universal or domain-specific (i.e., limited to
specific situations).
4. Finally, once you have discussed each axiom order them in
terms of strength, i.e., from the most restrictive (strongest - i.e.,
most often violated) to the least restrictive (weakest - i.e., the
least often violated) axiom
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Is Completeness Reasonable?

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Is Transitivity Reasonable?

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Is Independence Reasonable?

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Is Continuity Reasonable?

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Common Critiques of the Rational
Choice Framework
The “Suicide Bomber Critique” to Rational Choice

Argument:
Blowing yourself up is inherently irrational and
therefore cannot be explained by rational
choice theory.

Do you agree?

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The Paradox of Voting

Another common critique (highlighted in Green and Shapiro (1994))

is that rational choice theory cannot explain why people vote.
The standard decision-theoretic model of whether to vote is:
Vote if and only if Ui (vote) > Ui (stay at home)
p(B c) + (1 p)(0 c) > 0,
pB > c;
where
• p is the probability of i’s vote making the difference (i.e., makes a
tie or breaks a tie)
• B > 0 is i’s benefit of having their preferred candidate/party in
power,
• and c > 0 are i’s cost of voting.
As p is very small in most cases and therefore pB near zero, the
inequality will almost never hold, meaning that the model predicts
low turnout. 12
Responses to the Paradox of Voting

1. Models may not fit reality for a variety of reasons - not

necessarily a reason to abandon a whole theoretical framework.
E.g., model might be missing a crucial aspect:
• Voting as an expressive act of duty (Riker & Ordeshook (1968)) !
vote iff pB + D > c, where D > 0 is a duty term
• People might be altrusitic (Fowler 2005) ! vote iff
p(B + ↵NBO ) > c, where ↵ > 0 indicates the level of altruism, N
the size of the electorate, and BO the expected benefit to others
from the voters preferred candidate

2. Models might still generate insightful hypotheses. E.g., the

standard vote choice model (vote iff pB > c) predicts that all
else equal
• as c increases, individuals should be less likely to turnout
• as B increases, individuals should be more likely to turnout
• as p increases, individuals should be more likely to turnout

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Application of Rational
Decision-Making: Hilary’s 2008
Choice
Hilary’s 2008 Decision

In November 2008, a couple of weeks after the election of Barack

Obama, Hilary Clinton was offered the job of Secretary of State of the
United States. It was generally assumed that she faced the following
trade-off: joining the new administration, in perhaps the
highest-profile cabinet position, which offered the chance of
enhanced prestige and policy-making clout in the executive branch,
or continuing in the Senate, an option with less power (she would
still be only one in a hundred) but greater autonomy. The other
wrinkle was that most commentators assumed that taking an
administration job would preclude a primary challenge against
Barack Obama in 2021, and thus meant giving up a live-long dream to
be President of the United States. Thus, Hilary faced three possible
outcomes: Remain in Congress and not win the presidency in 2012
(C), remain in Congress and win the presidency in 2012 (P), or join the
administration as Secretary of State (S).

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Hilary’s 2008 Decision

1. State what you think Hilary Clinton’s preference ranking of the

three outcomes (i.e., C, P, and S) was at the time given the above
information and justify your answer.

2. Given her preference ordering and assuming the probability of

winning the White House in 2012 if she remained in the Senate
in p, formulate a rational choice decision-making model to
determine the minimal electoral chance (i.e., the smallest p) that
would have induced her to remain in the Senate to run in 2012.

3. Based on your analysis do you think Hilary Clinton’s decision

made sense?

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Hilary’s 2008 Decision

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Take Home Message and Outlook
Take Home Message

• An actor has rational preferences if they are complete and

transitive. Reasonable assumptions in situations where actors
care about the outcome.

• Rational choice under certainty is choosing the action that leads

to highest-ranked (or joint highest-ranked) outcome, given
constraints and preferences.

• Rational preferences under uncertainty require quantification

(in terms of utility) and the independence and continuity axiom
to hold.

• Rational choice under uncertainty is choosing the action that

leads to the highest possible expected utility, given constraints
and preferences.

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Outlook

Rational choice is a single-actor decision theoretic model. Next week

we will study strategic interactions by rational actors.

• Lecture topic: Modelling Basics II: Strategic Behaviour

• Essential reading: Binmore, Ken 2007. Game Theory: a very short
introduction, chapter 1 (via Talis Aspire Reading List).
• Pre-lecture video on “Strategic Interaction and the Nash
Equilibrium”
• Don’t forget to complete the Group Formation survey

I will also upload the first problem set on Monday, 16th October 2023
in the Assessment folder on Blackboard Learn Ultra. Due date: 27th
October 2023.

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