Abstract

A person as a social being is guided by his own interests, habits, customs, changes that have social significance. Institutions are also one of the most important elements of the social environment and are regulators and coordinators of behavior. Economic institutions regulate the behavior of economic subjects. Traditional economic theory considers economic behavior as rational. The classical concept of rationality represents the limitations of the objective function and resource components and explains real economic behavior. The decision-making process consists of a combination of resource and target aspects, respectively, rationality restrictions are imposed in the field of access to resources, goal setting and mechanisms of their combination, i.e., justification of behavioral action. Internal limitations on the choice of alternative actions have an impact on the decision-making process of economic actors. Among them are cognitive abilities, competence, value system, needs, innate personality traits and emotions. Imperfection of cognitive abilities can cause distortion of conclusions about economic realities, which leads to mistakes in actions. The specificity of the individual's cognitive capabilities, along with the uneven distribution of information, leads to the fact that economic entities are constantly exposed to uncertainty. Competence, which is an expression of the individual's experience, skills and accumulated knowledge, allows to reduce the level of uncertainty and increase the rationality of the subject's behavior. At the same time, the presence of a value system allows you to rank a person's interests and needs according to their importance to him, and thereby prioritize their satisfaction. At the same time, human needs, in contrast to the value system, are more situational in nature.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.