Individual Irrationality and Aggregate Outcomes

Publikation: Working paper › Forskning

Standard

Individual Irrationality and Aggregate Outcomes. / Fehr, Ernst; Tyran, Jean-Robert.

2005.

Publikation: Working paper › Forskning

Harvard

Fehr, E & Tyran, J-R 2005 'Individual Irrationality and Aggregate Outcomes'. https://doi.org/10.2139/ssrn.787666

APA

Fehr, E., & Tyran, J-R. (2005). Individual Irrationality and Aggregate Outcomes. IEW Working Paper Nr. 252 https://doi.org/10.2139/ssrn.787666

Vancouver

Fehr E, Tyran J-R. Individual Irrationality and Aggregate Outcomes. 2005 aug. 30. https://doi.org/10.2139/ssrn.787666

Author

Fehr, Ernst ; Tyran, Jean-Robert. / Individual Irrationality and Aggregate Outcomes. 2005. (IEW Working Paper; Nr. 252).

Bibtex

@techreport{0a0957f3deb5439780ba8bc7820f4e62,
title = "Individual Irrationality and Aggregate Outcomes",
abstract = "There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full rationality of all agents. Thus, a key question is how the interactions between rational and irrational people shape the aggregate outcome in markets and other institutions. We discuss evidence indicating that strategic complementarity and strategic substitutability are decisive determinants of aggregate outcomes. Under strategic complementarity, a small amount of individual irrationality may lead to large deviations from the aggregate predictions of rational models, whereas a minority of rational agents may suffice to generate aggregate outcomes consistent with the predictions of rational models under strategic substitutability.",
keywords = "Irrationality, Rationality, Anomaly, Aggregate Outcome, Competitive Markets, Money Illusion, Base Rate Fallacy",
author = "Ernst Fehr and Jean-Robert Tyran",
year = "2005",
month = aug,
day = "30",
doi = "10.2139/ssrn.787666",
language = "English",
series = "IEW Working Paper",
number = "252",
type = "WorkingPaper",

}

RIS

TY - UNPB

T1 - Individual Irrationality and Aggregate Outcomes

AU - Fehr, Ernst

AU - Tyran, Jean-Robert

PY - 2005/8/30

Y1 - 2005/8/30

N2 - There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full rationality of all agents. Thus, a key question is how the interactions between rational and irrational people shape the aggregate outcome in markets and other institutions. We discuss evidence indicating that strategic complementarity and strategic substitutability are decisive determinants of aggregate outcomes. Under strategic complementarity, a small amount of individual irrationality may lead to large deviations from the aggregate predictions of rational models, whereas a minority of rational agents may suffice to generate aggregate outcomes consistent with the predictions of rational models under strategic substitutability.

AB - There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full rationality of all agents. Thus, a key question is how the interactions between rational and irrational people shape the aggregate outcome in markets and other institutions. We discuss evidence indicating that strategic complementarity and strategic substitutability are decisive determinants of aggregate outcomes. Under strategic complementarity, a small amount of individual irrationality may lead to large deviations from the aggregate predictions of rational models, whereas a minority of rational agents may suffice to generate aggregate outcomes consistent with the predictions of rational models under strategic substitutability.

KW - Irrationality

KW - Rationality

KW - Anomaly

KW - Aggregate Outcome

KW - Competitive Markets

KW - Money Illusion

KW - Base Rate Fallacy

U2 - 10.2139/ssrn.787666

DO - 10.2139/ssrn.787666

M3 - Working paper

T3 - IEW Working Paper

BT - Individual Irrationality and Aggregate Outcomes

ER -

ID: 241647246