Investopedia

Continue to Site »

Rational Behavior

Filed Under » ,
Dictionary Says

Definition of 'Rational Behavior'

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally.
Investopedia Says

Investopedia explains 'Rational Behavior'

Rational behavior does not necessarily always involve receiving the most monetary or material benefit, because the satisfaction received could be purely emotional. For example, while it would be more financially lucrative for an executive to stay on at a company rather than retire early, it would still be considered rational behavior for her to seek an early retirement if she feels that the benefits of retired life outweigh the utility from the paycheck that she receives.

Articles Of Interest

  1.

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.

  2. Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!

  3. Behavioral Finance

    Learn the science behind irrational decision making and how you can avoid it.

  4. Women And Investing: It's A Style Thing

    You don't have to be a boy or act like a boy to win. In fact, doing the opposite could be better for your financial health.

  5. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  6. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  7. Build A Model Portfolio With Style Investing

    This sophisticated approach will add flair to your returns.

  8. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  9. How To Develop A Trading Brain

    The fundamental role of trader psychology tends to be underestimated, with too much emphasis placed on the technical side.

  10. Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center