The role of limits to rational decision making in optimal economic behaviour
Sergiu Ungureanu works on theoretical models of bounds to rational decision making, which can stem from memory or knowledge limitations, or the time and costs associated with difficult decision making. Previous work has dealt with loss aversion in the context of limited knowledge of the utility of consumption. Sergiu’s current work is modelling the effect of errors in the parameters of options, which can justify a more robust, but biased, decision making process. Such a robust decision making process can exhibit typical behavioural effects: overweighting of small probabilities and underweighting probabilities close to one, present bias, slower than exponential time discounting (such as hyperbolic discounting), and even loss aversion.
Academic: Sergiu Ungureanu
Name of project: The role of limits to rational decision making in optimal economic behaviour, and the implications for basic economic institutions.
Subject: Behavioural and Experimental Economics