Review of Behavioral Economics > Vol 9 > Issue 2

A Ratio-Difference Theory of Choice: An Article Written to Honor Richard Hollis Day

Mina Mahmoudi, Rensselaer Polytechnic Institute, USA, mahmom2@rpi.edu , Mark Pingle, University of Nevada-Reno, USA, pingle@unr.edu , Rattaphon Wuthisatian, Southern Oregon University, USA, wuthisatr@sou.edu
 
Suggested Citation
Mina Mahmoudi, Mark Pingle and Rattaphon Wuthisatian (2022), "A Ratio-Difference Theory of Choice: An Article Written to Honor Richard Hollis Day", Review of Behavioral Economics: Vol. 9: No. 2, pp 155-171. http://dx.doi.org/10.1561/105.00000151

Publication Date: 07 Jun 2022
© 2022 M. Mahmoudi, M. Pingle and R. Wuthisatian
 
Subjects
Behavioral Economics
 
Keywords
JEL Codes: D11, D81, D90
Decision theorybounded rationalityratiodifferencerisk aversion
 

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In this article:
1. Introduction 
2. Literature Review 
3. A Behavioral Consumer Choice Theory 
4. Extending the Model to Discounted Decisions 
5. Extending the Model to Simple Uncertain Decisions 
6. Conclusion 
References 

Abstract

We humans find it difficult to comprehend the magnitude of one thing without comparing the magnitudes of two things. When we compare two magnitudes, we tend to use ratios and differences. This suggests a procedural theory of decision making should contain the possibility of using ratios and differences in the process. Here, we present a “ratio-difference” theory of decision-making. We illustrate that a procedural decision theory that gives weight to ratio comparisons and difference comparisons has the potential to not only provide standard choice theory conclusions but also explain a number of decision anomalies.

DOI:10.1561/105.00000151

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Review of Behavioral Economics, Volume 9, Issue 2 Special Issue Honoring Richard H. Day: Articles Overiew
See the other articles that are part of this special issue.