Redefining rationality: Bridging theory and application

One of the liveliest areas of economic theory concerns modeling individual decision-making in various contexts. Despite its sophistication, due to the extremely limited nature of the assumption of rationality, economic individual choice models are often refuted on explanatory grounds. In a few environments of economic interest, I wish to offer pragmatic remedies for these situations.; In the first chapter, we propose a revealed preference theory that modifies the standard static choice theory. Our paper introduces to the model the possibility that the decision maker may have an initial reference point, which can be interpreted as a default option, current choice and/or an endowment. This expands the classical setup, and leads to some intuitive representations of choice behavior.; In the second chapter, we focus on intertemporal decision---decisions involving tradeoffs among costs and benefits occurring at different times. The economic model of invariant and constant time preference rates has been violated frequently. An alternative theory of time preference has been developed in order to cope with these anomalies. The main result is a representation theorem for time preferences (on the prize-time space) that cover a variety of time preference models considered in the experimental and theoretical literature on intertemporal choice. One major advantage of this result is, therefore, to identify certain factors that are common to seemingly very different time preference structures, and provide a tractable mathematical format that allows for investigating certain economic environments without subscribing to a particular time preference model.; In the last chapter, I draw attention to the fact that indifference relations are not transitive because human mind is not necessarily capable of perfect discrimination. I extend the numerical representation that involves 'error'. The aim of this chapter is to explore two cases: In the first case, the error value decreases when the corresponding utility value increases. This case explains situations where alternatives with small utility values are considered to be similar. In contrast the second case analyzes situations where the error value of the alternative increases along with the corresponding utility value. This refers to cases where alternatives with high utilities are considered to be similar.