What is rational behavior?

In the world of the economy, the rational behavior is a term used to describe the process of taking financial decisions on the basis of which procedure will bring the greatest advantage. This process is often assumed that it is the basis for any type of transaction activity, from the purchase of goods in the local supermarket to the opening of the company or buying securities blocks within the investment system. Rational behavior is also considered to be the basis for most of the theories concerning finances, including theories such as the Limit usefulness law.

It is important to realize that rational behavior is not limited to the implementation of monetary benefits. While obtaining a return or profit from a financial decision is often a motivation for action, there are other forms of satisfaction that may also result from the activity. For example, the consumer may decide to buy an item because he expects to gain more personal satisfaction from ownership of an abrasive brand, although a similar brand that is cheaper would saveLa money. It is really possible to lose money, but to get a different form of satisfaction and thus use rational behavior.

In the root of rational behavior, the process of determining what types of benefits or satisfaction will be achieved by making a specific financial decision versus by a different decision. Comparing the relative advantages of each decision and allowing potential disadvantages easier to deal with the selection, which eventually provides the greatest overall satisfaction. This would be true for someone who considered early retirement. On the one hand, continuing to work up to the standard age of retirement would usually mean larger nest eggs in retirement, but the individual can find that more time with close or opportunities to travel now rather than Later outweighs other financial resources that have been accumulated for several years. Alternatively, an individual can decideThat financial rewards are more important than the benefits they would receive by retirement and decide to stay at work.

In many situations, rational behavior in economic or financial matters is at least partially subjective. Once all possible benefits are identified, the individual can determine whether these benefits are sufficiently desirable to eliminate further selection. The right decision for one individual can be a bad step for someone else, which is all the more important to look at all types of benefits before choosing the procedure.