Deviation from Rationality: Black Friday Studies and Tesla Stock Price Fluctuations

Abstract

This paper examines rationality from a bahaviour economic perspective, based on the case of consumers’ irrationality on Black Friday and investors’ irrationality in Tesla’s stock fluctuations, constructing an applicable insight into traditional economic theories. This study mainly focuses on three terms: Mental accounting, risk preference, attention theory and relevant social factors among consumers, investors, and market regulators, which results in market inefficiency and disinformation. Traditional theories suggest absolute rationality in decision-making based on perfect information and unchanged preference while the new behaviour theories reveal that humans are controlled by emotion, herding, fear of risk, and many other reasons that push them away from the rational path. In the key findings, consumers are easily overspending due to loss aversion, unjustified mental accounting, and eye-catching advertisement whereas investors in Tesla react overactive to clutter online but not to the financial condition of the enterprise itself, leading to the swing of stock price. Some rational tools like cooling-off periods and regulatory intervention may be suggested in advice. The final section of the paper indicates the future research direction could be on digital techniques and influences on irrational behaviour, accelerating the insights developed in mitigating the biases and instability.

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