Define the Instrumental Rational Choice model and its components, and then describe a

decision you made recently which does not follow this model, explaining how your
decision-making process differed from this model. With reference to relevant literature,
use a theory or experiment which we have studied on this module to explain your
behaviour in this situation. How might you apply what you have learned in order to
make better decisions in the future?

ESSAY STRUCTRE

- INTRO
What is the IRC
How does it apply to room decision
What predictions does it make
What is going wrong?

- INSTRUMENTAL RATIONAL CHOICE MODEL

 Preferences
 Constraints
 Evidence
 Decision

- Decision which did not follow the model + why

- Room decision-
- Bounded rationality
- Emotions
- Theories to discuss

- How the decision-making process differed

- Goes against IRC

- Relevant theory:

- Bounded rationality
- [Link]
- bounded rationality considers the cognitive limitations of decision makers in
attempting to achieve those goals. Its scientific approach is different; rather than
making assumptions about decision making and modelling the implications
mathematically for aggregate behaviour (as in markets or legislatures), bounded
rationality adopts an explicitly behavioural stance. The behaviour of decision makers
must be examined whether in the laboratory or in the field.
[Link]
i.2.1.297
- [Link]
publication/354784802_Bounded_rationality_in_decision-making/links/
64114e8766f8522c38a61966/[Link]
-
 - Satisficing model- optimal solution – settle for certain threshold of acceptability or
solution
- In this case, certain threshold- being room isn’t too mouldy and is water is not falling
through the ceiling – good enough ([Link]
rationality)
- Was not the best possible decision- made me ill etc…
- Not maximising my utility- taking the easy way out of decision making
- Trusting your gut…not wanting to upset housemates- anger theory
- Cognitive limitations and simplified decision making the decision to stay in the damp
room rather than inconvenience a flatmate reflects an attempt to simplify the
problem by focusing on immediate, emotionally salient factors:
- Avoiding guilt or social tension (prioritizing relationships over health risks).
- Minimizing short-term disruption (avoiding the effort of moving belongings).

- Satisficing Rather Than Optimizing

- Rather than optimizing for long-term health and well-being, the individual settles for
a "good enough" solution that addresses social concerns and minimizes perceived
inconvenience.
- Satisficing occurs when the decision-maker chooses the first acceptable option that
resolves immediate issues (e.g., staying put to avoid conflict with the flatmate).

Heuristics at Play

 The use of social heuristics—like avoiding being a burden on others—guides

decision-making.
 This heuristic simplifies a complex decision but neglects the longer-term
consequences (falling ill due to damp and mould).
 [Link]
 [Link]


Framing and Emotional Weights

 The decision is heavily influenced by the framing effect: the cost of asking for help or
imposing on a flatmate is framed as a loss (inconvenience and social strain).
 Loss aversion (as explored in prospect theory) might lead to greater weight being
given to the potential relational "losses" than to health risks.]
 Rationality and emotion (emotion of guilt made me act irrationally)
 Failure to control the emotion itself (page 70-textbook)

Emotions
Intuition
Heuristics

- Application of learning for better decision making

- Not rushing decisions
- Proper research and theory etc…
Comprehension of IRC

Your decision to stay in your room despite the health risks demonstrates an understanding of
the Instrumental Rational Choice (IRC) model, though your behavior ultimately deviates
from its predictions. IRC suggests that rational actors make decisions that maximize utility
based on preferences and available evidence. The model would predict that you would
prioritize your health by moving to a safer environment since dampness and mold are well-
documented health hazards. However, as you explained, this was outweighed by concerns
about inconveniencing your flatmate and maintaining harmony in your living environment.

 Further Reading and Depth: IRC often assumes that individuals have the capacity
to weigh costs and benefits rationally. Critics argue that the model does not
adequately account for the emotional and social dimensions of decision-making,
which played a significant role in your case. Research by Amartya Sen (1977) on
"commitment" highlights that individuals often make decisions based on social
obligations or guilt, which undermines the purely utility-maximizing assumption of
IRC. This aligns with your behavior, as your guilt and commitment to social harmony
overrode health-related concerns.

Predictions of IRC in Complex Scenarios

In complex scenarios like yours, where preferences are conflicting (health vs. social
harmony), IRC might predict a prioritization of long-term health over temporary discomfort.
However, the bounded rationality framework (Simon, 1955) provides a more nuanced
explanation by acknowledging the limits of human cognition and the emotional weight of
social concerns.

 Beyond the Module: Studies in behavioral economics, such as Kahneman and

Tversky's Prospect Theory (1979), demonstrate how decisions can deviate from
rational predictions due to framing and loss aversion. You framed moving out as a
"loss" in terms of social harmony, which outweighed the "gain" of protecting your
health, despite the objective evidence suggesting otherwise.

Weaknesses of IRC

IRC assumes that preferences are fixed and decision-makers have complete information.
However, in your case:

1. Preferences were dynamic and context-dependent: While health was a priority,

immediate concerns about social harmony were emotionally more salient.
2. Incomplete information: The uncertainty surrounding repair timelines and potential
flatmate responses added complexity, leading to a reliance on heuristics and
emotional reasoning.
3. Bounded rationality: Your cognitive load and emotional stress led to satisficing
rather than optimizing, settling for staying in the room despite its risks.
Comprehension of Bounded Rationality

Bounded rationality complements IRC by explaining deviations from rational predictions. It

acknowledges that decisions are made within constraints of limited cognitive resources,
incomplete information, and time pressures. Your decision reflects heuristic-driven
reasoning:

 Social Heuristic: Avoiding being a burden to your flatmate took precedence over
long-term health.
 Framing Effects: Framing the situation as a choice between social harmony and
health led to prioritizing the former.
 Further Reading: Gerd Gigerenzer's work on ecological rationality suggests that
heuristics are not inherently irrational but are shaped by the environment. In your
case, the social context influenced your reliance on heuristics.

Identification of Strategies

Your decision illustrates the need for strategies that integrate both rational and bounded
approaches to decision-making:

1. Use of Evidence-Based Decision-Making: Explicitly weighing the long-term health

risks of staying in the room against the short-term discomfort of moving could have
supported a more balanced decision.
2. Communication Strategies: Openly discussing concerns with your flatmate might
have reduced the perceived emotional and social cost of moving.
3. Cognitive Reframing: Reframing the act of moving as an investment in your health
and well-being could mitigate guilt and loss aversion.

 Further Depth: Behavioral interventions, such as nudges (Thaler & Sunstein, 2008),
could help reframe such situations to prioritize long-term outcomes. For example, a
reminder of the cumulative health risks associated with mold might have shifted your
decision-making focus.

Application of Theories

Applying both IRC and bounded rationality highlights the complexity of your decision. IRC
provides a theoretical benchmark, predicting that health-related preferences should dominate.
However, bounded rationality explains the divergence due to emotional and cognitive
constraints.

Writing and Clarity

The analysis is structured clearly and convincingly, connecting key elements of decision
theory to your behavior. The use of bounded rationality alongside IRC demonstrates how
theoretical models can complement one another to provide a deeper understanding of
decision-making.
Citations and References

1. Simon, H. A. (1955). A behavioral model of rational choice.

[Link]

2. Kahneman, D., & Tversky, A. (1979). Prospect Theory: An analysis of decision under
risk.
3. Gigerenzer, G. (2008). Rationality for Mortals: How People Cope with Uncertainty.
4. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health,
wealth, and happiness.
5. Sen, A. (1977). Rational fools: A critique of the behavioral foundations of economic
theory.

This comprehensive analysis reflects an outstanding level of understanding, integrating

theoretical insights with practical application and critical evaluation.

+10 references at least 4 per point (objective)

Real world examples- theory, impacts peoples behaviour, outside of your decision
making
Decision making in a new way- being able to put stuff into practice
Is decision making going to be better

Simon, Herbert A. “A Behavioral Model of Rational Choice.” The Quarterly Journal of

Economics, vol. 69, no. 1, 1955, pp. 99–118. JSTOR, [Link]
Accessed 29 Nov. 2024.

Selten, Reinhard. “Bounded Rationality.” Journal of Institutional and Theoretical Economics

(JITE) / Zeitschrift Für Die Gesamte Staatswissenschaft, vol. 146, no. 4, 1990, pp. 649–58.
JSTOR, [Link] Accessed 29 Nov. 2024.