Normative Analysis Of Decision Making

I. Introduction
―Making decisions is like speaking prose—people do it all the time, knowingly or unknowingly‖ (Kahneman and Tversky, 1983). That‘s why ―understanding of the decision-making processes could help us in preventing bad decisions and in stimulating the good ones‖ (Polic, 2009).
While the interest in the decision-making is common for many disciplines from mathematics and statistics, through economics and political science, to sociology and psychology, each science is attempting to provide its own account of events, its own explanations and models for the same processes. It seems quite natural that the behavior of individuals may and should be an object of primary interest for psychologists, however the majority of the classical decision

The normative analysis is concerned with the nature of rationality and the logic of decision making. The descriptive analysis, in contrast, is concerned with people's beliefs and preferences as they are, not as they should be. Whereas philosophy and rational-choice theory focuses more on normative or prescriptive issues, it was psychology which took over economic and mathematical theories of decision making and based on them formed its decision-making models, and tested them experimentally (Polic, 2009). That‘s the reason why this paper is based not only on economic sources, but also on the research provided by various other disciplines and psychology in

Models based on rational choice and behavior, (e.g. SEU, multiattribute utility theory, Bayesian inference models) prevailed during the period between 1955 and 1975. Within these approaches the choices, the uncertainties and the outcomes were explicitly given. Moreover classical decision theories were based on the principle of optimization developed by well-known mathematician and pioneer of modern computer science John von Neumann and economist Oskar Morgenstern in 1944 in the book Game theory and economic behavior.
• descriptive models. Stemming from the rational models descriptive ones argue that humans usually do not make decisions in this way and regarded deviations from the prescribed procedures as heuristics and deviations from the correct responses as biases. This approach - mostly related to the research conducted by psychologists - was appealing during the period between 1965 and 1985. Herbert Simon with his influential concept of bounded rationality was pioneer of this way of