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
Date Written: November 12, 2013
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: Suggested Citation