Definition
- Rationality
- Rationality means that people take all the available information and make consistent, informed decisions that are in their own best interest.
- Not to be confused with: Behavioural economics
- Behavioural economics is the study of decision-making that brings the insights of psychology into economics.
Test yourself
What is the difference between rationality and behavioural economics?
Rationality is the assumption the model makes; behavioural economics is the field that tests it against how people really choose.