A Target-Oriented Approach: A 'One-Size' Model to Suit Humans and Econs Behaviors

8 Pages Posted: 15 Nov 2013 Last revised: 28 Aug 2015

See all articles by Robert Bordley

Robert Bordley

University of Michigan at Ann Arbor

Luisa Tibiletti

University of Turin - Department of Management

Mariacristina Uberti

University of Turin

Date Written: November 12, 2013

Abstract

Thaler and Sunstein (2008) introduce two stereotypical decision makers: the Econs, imaginary people who always behave as strictly rational expected utility maximizers, and the Humans, real people subject to ordinary behavioral biases. This note sheds light on how the axiomatic target-oriented approach introduced by Castagnoli and Li Calzi (1996) may fit well the behavior of both of them. We show that although Econs and Humans use a different language, they maximize the same functional, e.g. the probability of meeting the goal. So declaring the probability distribution of the goal permits to elicit the agent value function. A number of different distributions for goals are discussed and the family of the skew normal ones is proposed for its user-friendly flexibility. We show how moving the skewness parameter along its range every stereotypical decision maker’s profile may be modelled.

Keywords: Goal-oriented decision making, Value function assessment, Skew normal uncertain target

JEL Classification: G02, G11

Suggested Citation

Bordley, Robert and Tibiletti, Luisa and Uberti, Mariacristina, A Target-Oriented Approach: A 'One-Size' Model to Suit Humans and Econs Behaviors (November 12, 2013). Available at SSRN: https://ssrn.com/abstract=2354058 or http://dx.doi.org/10.2139/ssrn.2354058

Robert Bordley

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Luisa Tibiletti (Contact Author)

University of Turin - Department of Management ( email )

C.so Unione Sovietica, 218 bis
Turin, Turin 10100
Italy
39-11-670-6229 (Phone)
39-11-670-6238 (Fax)

HOME PAGE: http://www.management.unito.it/tibiletti

Mariacristina Uberti

University of Turin ( email )

Via Po 53
Torino, Turin - Piedmont 10100
Italy

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