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Economic Decisions and Institutional Boundaries

Abstract

This chapter introduces decision making from a microeconomic perspective. The analysis is based on the assumption that individuals aim at maximizing their wellbeing. However, the set of options to reach that personal objective is limited by exogenous factors. These boundaries are modeled within the general framework of so-called institutions, that is, rules that define individual choice options. We show how adaptation to institutions is part of the decision-making process. In addition, the chapter shows that the interplay between individual interests and exogenous factors cannot only be used to analyze economic questions but can also be extended to other social sciences and the humanities as well as to sociobiology.