Models of irrational behaviour of household and firm

• Published in: Ekonomika (Niš, Serbia) Vol. 61; no. 4; pp. 1 - 10
• Main Authors: Krstic, Bojan, Krstic, Milos
• Format: Journal Article
• Language: English
• Published: Nis Drustvo Ekonomista Ekonomika 01.01.2015
• Subjects: Altruism; Commodities; Consumer behavior; Consumers; Consumption; Decision making; Demand curves; Economic theory; Economists; Households; Profit maximization; Psychologists; Rationality; Realism; Studies
• ISSN: 0350-137X; 2334-9190
• DOI: 10.5937/ekonomika1504001K

To study the basic characteristics of impulsive household, economists use probabilistic different models, These models are stylized and lack many details. Despite the fact that these models lack realism, studying these models will enable economists to see what is really important for them. For example, increasing the relative price of commodity X decrease the consumption of commodity X. The model of irrational household behaviour indicates that the irrational economic subjects will be forced to behave as-if rational, i.e. that their behaviour is consistent with the fundamental theorem of rationality of traditional economic science that states: demand curve of rational household have a negative slope. Also, The model of irrational household behaviour indicates that a large number of independent impulsive households gravitate toward the point p, which represents the best of choice. This theory is true for irrational firms.