Expected value and expected utility are often referred to as normative or prescriptive models because they suggest how decisions should be made, while the notion of bounded rationality is descriptive because it suggests how decisions are made.

Question

Quizplus · Accepted Answer

This statement is correct. Expected value and expected utility models provide a normative framework by outlining how rational decision-makers should evaluate options to make the best choice. On the other hand, the notion of bounded rationality is a descriptive model, which describes how decision-makers make choices in reality, acknowledging limitations to their rationality and cognitive capabilities.

Expected Value and Expected Utility Are Often Referred to as Normative