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Paradoxes and Violations of Normative Decision Theory

  1. Jay Simon1,
  2. Yitong Wang2,
  3. L. Robin Keller2

Published Online: 15 JUN 2010

DOI: 10.1002/9780470400531.eorms0636

Wiley Encyclopedia of Operations Research and Management Science

Wiley Encyclopedia of Operations Research and Management Science

How to Cite

Simon, J., Wang, Y. and Keller, L. R. 2010. Paradoxes and Violations of Normative Decision Theory. Wiley Encyclopedia of Operations Research and Management Science. .

Author Information

  1. 1

    Naval Postgraduate School, Defense Resources Management Institute, Monterey, California

  2. 2

    University of California Irvine, The Paul Merage School of Business, Irvine, California

Publication History

  1. Published Online: 15 JUN 2010

Abstract

In this article, first classic examples of descriptive violations of normative decision theory from Allais and Ellsberg are discussed, and then the behavioral phenomena of loss aversion, endowment effect, status quo bias, and framing effects are discussed.

Keywords:

  • economic decision theory;
  • normative theory;
  • utility theory;
  • certainty effect;
  • reflection effect;
  • decision analysis;
  • prospect theory;
  • endowment effect;
  • status quo bias;
  • loss aversion