publication . Preprint . Article . 2005

Relative Thinking Theory

Ofer H. Azar;
Open Access
  • Published: 09 Apr 2005
The article presents a theory that I denote "Relative Thinking Theory," which claims that people consider relative differences and not only absolute differences when making various economics decisions, even in those cases where the rational model dictates that people should consider only absolute differences. The article reviews experimental evidence for this behavior, summarizing briefly several experiments I conducted, as well as some earlier related literature. It then discusses how we can think about relative thinking and formalize this behavior. Later, the article addresses several related questions: why do people exhibit relative thinking, whether it is be...
free text keywords: Relative thinking, relative differences, behavioral decision making, behavioral economics, psychological economics, Weber's law, absolute differences, percentages, ratios, Economics and Econometrics, jel:D10, jel:M30, jel:L10, jel:C91, jel:A12, Economics, Positive economics, Behavioral economics, Public economics, Rational planning model, Behavioral decision making
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