Rational Choice Theory

Rational choice theory (RCT) is a method of formally describing decision-making situations to explain, predict, or prescribe a course of action. (Rational choice theorists disagree among themselves over whether the theory is properly seen as descriptive and predictive or instead prescriptive.) The theory seeks to explain choice in terms of agents’ beliefs and desires, assuming that agents do their best to choose courses of action that they believe will satisfy their desires. RCT is an attempt to understand people’s actions as calculated reactions to the situations they face. It holds that through observing actions, we can infer people’s preferences; alternatively, if we understand people’s options and their preferences, we can predict or prescribe their actions.

Some Examples

A simple example will help. Imagine that the management team ...

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