Definition ∞ Economic rationality is a foundational assumption in economic theory, positing that individuals make decisions to maximize their utility or profit given available information and constraints. This concept suggests that actors in a market behave in a consistent and logical manner when allocating resources or choosing between alternatives. It underpins many models used to predict market behavior and policy outcomes.
Context ∞ In the context of digital assets, economic rationality is often discussed when analyzing investor behavior during market volatility or the design of tokenomics that incentivize specific actions. News reports might question whether market participants always act rationally, especially during speculative frenzies or sudden price drops, leading to debates on behavioral economics within crypto. The assumption of rational actors is critical for evaluating the long-term viability and stability of decentralized economic systems.
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