Relative thinking theory

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

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 of this behavior, discusses how we can formalize this behavior, and addresses several issues related to relative thinking. Finally, the article explains why firms seem to respond to relative thinking of consumers, and suggests additional implications of relative thinking for economics and management.

Original languageEnglish
Pages (from-to)1-14
Number of pages14
JournalJournal of Socio-Economics
Volume36
Issue number1
DOIs
StatePublished - 1 Feb 2007

Keywords

  • Behavioral decision making
  • Behavioral economics
  • Psychological economics
  • Relative differences
  • Relative thinking

ASJC Scopus subject areas

  • Economics and Econometrics

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