One Reason Why the Rational Choice Model Doesn't Fit Reality

question 105

Multiple Choice

One reason why the rational choice model doesn't fit reality is that it focuses on logical thinking and completely ignores:

• A)emotions.
• B)alternatives.
• C)evaluation of solutions.
• D)subjective expected utility.
• E)organizational politics.

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Definitions:

Liquidity Premiums

Additional returns investors demand for holding securities that are not easily convertible to cash without a loss in value.

Mispricing

The occurrence when the market price of an asset does not accurately reflect its intrinsic value, possibly due to information asymmetry, market inefficiency, or other factors.

Extraneous Risk

External risk beyond the control of investors or the company, not directly related to the investment's or company's specific activities.

General Market Exposure

The extent to which an investment or portfolio is subject to fluctuations in the overall market.