Why we make Irrational Choices

To understand what is irrationality it is better to understand what rationality is: rationality is the idea that our choices are made based on what brings us the most utility and benefit. Although, we may think we instinctively do this, we all have probably got thoughts in our head from when we have made a decision we regret and this is a source of irrationality which is what we are going to discuss. The main reasons for irrational thinking is:

• Imperfect Information
• Time-Pressure
• Computational Weakness

Imperfect information is where the person isn’t fully aware of the decision’s outcome before they have made it. This is combined with bounded self control which means that someone may make an irrational decision without considering the ramifications. For example, someone sell you a car with a few faults but without informing you about these faults, you may not be aware about them until you buy the car and this is an example of imperfect information- this is commonly done in masking the downsides of goods and services in marketing.

Time pressure and computational weakness are self explanatory but what they suggest is that if time is limited, someone may not be able to fully evaluate their decisions before making them which makes them irrational as a consequence. This is most noticeable in…