Chapter 3: Understanding at the Micro level: Agents&Actors Flashcards
What is the difference Ontological individualism and Methodological individualism?
According to ontological there are only individual natural persons, everything else is just the aggregate of their actions ⇔Social phenomena (e.g. rules, institutions) really exist (e.g. money), but we can explain these social phenomena only from the actions and behaviours of individual human beings
What are the Meta-theories?
Theory about another theory
Assumptions, ambitions, modes of explanation, unit(s) of analysis, epistemologies, methodological prescriptions, etc. of the thories in a certain field (e.g. management); units we look at can be individual or holistic;
What is the Rational choice theory?
Explains behaviour and social level outcomes (eg. institutions) from the rational choices of individual agents; everybody’s self-interested, logical, has all knowledge
What’s game theory?
Application of rational choice theory. It analyses situations in which the choices of individuals are interdependent meaning that results depend on more than one individual
Explaining patterns of behaviour and institutions from interdependent rational choices
What’s Prisoner’s Dilemma?
Police accusing two suspects of murder.
- Both prisoners deny, both get 2 years of jail
- Both confess, both takes 20 years
- One confess and testifies against the other, the first one is free, the second takes 20 years
What’s Nash equilibrium?
No choice can be changed in favor of one of the players
What is Strategic Rationality?
People anticipate choices of others as best as they can (rock, paper, scissors)
What is Parametric Rationality?
Looks at choices of other agents as given parameter; choices known already
What’s Pareto optimality?
No choice can be changed in favor of a player without hurting the other player
Agency theory
Why agency relationships lead to problems?
→Difference in decision-maker and who is exposed to consequences; Information asymmetry; Conflict of interest; residual loss (e.g. empire building); Adverse selection; Moral hazard
How can we Solve agency problems?
→Monitoring (costs bore by the principal), bonding (costs bore by the agent)
What is tragedy of the Commons?
Everybody can take as much as they want from a resource and how to manage it
