A fundamental axiom of rational choice theory is
A)choices should be independent of relevant alternatives.
B)choices should be independent of irrelevant alternatives.
C)consumers should be risk-neutral.
D)consumers should disregard recent performance data.

Question

Quizplus · Accepted Answer

According to rational choice theory, choices should only be influenced by relevant information and not by irrelevant information. Option B states that choices should be independent of irrelevant alternatives, making it the closest to this fundamental axiom. Option A, on the other hand, suggests that choices should be independent of relevant alternatives, which is not what rational choice theory dictates. Option C suggests that consumers should be risk-neutral, which may not always be the case as consumers differ in their risk tolerance. Option D implies that consumers should disregard recent performance data, but in reality, recent performance data may have a significant impact on decision-making.

A Fundamental Axiom of Rational Choice Theory Is