Golf Theory, a unifying framework for studying human choice behavior

Abstract

In the study of decision sciences, a plausible theory of choice is a key factor to understanding and predicting both the market and human behavior. The investigation of choice behavior is a continuing endeavour within economics and psychology which has been extended to neuroscience too. Due to this vast interest, a considerable number of theories have been published on choice behavior. Each theory, regardless of its success in explaining choice behavior, has been challenged by a newly observed behavior in the field studies or in the lab experiments. Traditionally, utility-based theories were widely used to explain or predict decision behavior, however, the accumulation of evidence against such theories has caused a perspective shift in the modern theories. The new theories of choice are more focused on the fundamental cognitive capacities driving choice behavior for the explanations on choice behavior. Despite the invaluable insights such theories provided, modern theories of choice lack the generalizability across different experimental setups and cognitive biases. This thesis lays out the foundation of a new theory which provides a unifying framework for studying choice behavior. Golf theory has been tested on two of the most controversial cognitive biases in decision making; endowment effect and context effects. Predictions generated by this mathematical framework are compatible with the findings and behavioral evidence in the relevant literature. However, Golf theory expands our understanding of choice behavior for instances where the existing theories either cannot predict the behavior accurately or even provide any prediction. This has been illustrated in the form of two hypothetical experiment throughout the thesis.