Rational selection theory

Rational choice theory included to a category of guidelines that guide understand economic and social behaviour. The conviction originated in the eighteenth century together with can be traced back to political economist and philosopher, Adam Smith. The impression postulates that an individual will perform the cost-benefit analysis to creation whether an selection is modification for them. It also suggests that an individual's self-driven rational actions will assist better the overall economy. Rational choice theory looks at three concepts: rational actors, self interest and the invisible hand.

Rationality can be used as an given for the behaviour of individuals in a wide range of contexts outside of economics. it is also used in political science, sociology, and philosophy.

Utility maximization

Often preferences are described by their utility function or payoff function. This is an ordinal number that an individual attaches over the usable actions, such as:

The individual's preferences are then expressed as the explanation between these ordinal assignments. For example, if an individual prefers the candidate Sara over Roger over abstaining, their preferences would work the relation:

A preference relation that as above satisfies completeness, transitivity, and, in addition, continuity, can be equivalently represented by a good function.