In the field of economics the microanalyses of decision-making and habit formations are the cornerstone for understanding rational behavior. However, the expectation of rationality in all situations may be unrealistic, due to time and cognitive constraints. This does not undermine the fundamentals of economics, however, indicates that current models and definitions of economic decision-making do not take into account all pertinent variables. Take for example Herbert Simon’s (1982) bounded rationality. He suggested that a rational actor is cognitively limited by the bounds of the human brain, and therefore they will consider a limited set of options and pick whichever reached a certain utility threshold. This process, known as “satisficing,”
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1997, Bickell et al., 1999, Madden et al., 1999) ranging from animal behavior to drug addict’s risk evaluation. For this paper in particular, hyperbolic discounting plays a major role, because it underlies how people make decisions about risk, and can be motivated by environmental cues and psychological variables like peer influence. Allan et al. (2009) suggests this after they proved that a person may correctly evaluate the cost of poor eating by subscribing to a diet, but will most likely relapse at the sight of chocolate cake. Environmental cues in this situation drive internal cognitions through the limbic system and overwhelm proper discounting promoted by the medial prefrontal cortex. Adolescences then would be equally if not more susceptible to environmental cues and peer influence, because they lack mature executive function to overcome these pressures. This sentiment is echoed in a paper Ahern et al. (2014), who proved that risk aversion is systematically shaped and influenced by a person’s peers. In both of these studies, the individual rationally discounts time at a particular point, but changes that evaluation after exposure to some extrinsic motivating variable. Giving credence to the relativity of rational decisions particularly in
1997, Bickell et al., 1999, Madden et al., 1999) ranging from animal behavior to drug addict’s risk evaluation. For this paper in particular, hyperbolic discounting plays a major role, because it underlies how people make decisions about risk, and can be motivated by environmental cues and psychological variables like peer influence. Allan et al. (2009) suggests this after they proved that a person may correctly evaluate the cost of poor eating by subscribing to a diet, but will most likely relapse at the sight of chocolate cake. Environmental cues in this situation drive internal cognitions through the limbic system and overwhelm proper discounting promoted by the medial prefrontal cortex. Adolescences then would be equally if not more susceptible to environmental cues and peer influence, because they lack mature executive function to overcome these pressures. This sentiment is echoed in a paper Ahern et al. (2014), who proved that risk aversion is systematically shaped and influenced by a person’s peers. In both of these studies, the individual rationally discounts time at a particular point, but changes that evaluation after exposure to some extrinsic motivating variable. Giving credence to the relativity of rational decisions particularly in