2003•Journal of Shanxi Finance and Economics UniversityRequires access

On the Irrational Effect of the Purse-game Paradox and Its Implication to Behavioral Economics

Huang Chang-zheng

Abstract

A cognitive framework of the purse-game paradox which is an important micro model in the behavioral economics is established; this framework not only clears up the paradox completely, but also shows a new irrational effect which is irrelevant to the utility and probability. This effect could bring on the transaction trap and produce more complicated irrational decision making together with some known effects of behavioral economics.

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Key concepts: Irrational number, Behavioral economics, Economics, Expected utility hypothesis, Microeconomics, Game theory, Transaction cost, Mathematical economics