Bounded Rationality

1. Bounded Rationality https://store.theartofservice.com/the-bounded-rationality-toolkit.html

2. Carnegie Mellon University Research • Carnegie Mellon is also home to the Carnegie School of management and economics. This intellectual school grew out of the Tepper School of Business in the 1950s and 1960s and focused on the intersection of behavioralism and management. Several management theories, most notably bounded rationality and the behavioral theory of the firm, were established by Carnegie School management scientists and economists. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

3. Network governance Role in environmental governance • The main argument in the literature for the advantage of network governance over traditional command and control regulation or, alternatively, recourse to market regulation, is its capacity to deal with situations of intrinsic uncertainty and decision making under bounded rationality https://store.theartofservice.com/the-bounded-rationality-toolkit.html

4. Organizational communication - Assumptions underlying early organizational communication • Herbert A. Simon introduced the concept of bounded rationality which challenged assumptions about the perfect rationality of communication participants. He maintained that people making decisions in organizations seldom had complete information, and that even if more information was available, they tended to pick the first acceptable option, rather than exploring further to pick the optimal solution. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

5. Economics of scientific knowledge • Modelling strategies might use any of a variety of approaches including the neoclasscial, game theoretic, behavioural (bounded rationality) information theortic and transaction costs https://store.theartofservice.com/the-bounded-rationality-toolkit.html

6. Economic bubble • While some economists deny that bubbles occur,[page needed] the cause of bubbles remains disputed by those who are convinced that asset prices often deviate strongly from intrinsic values. Many explanations have been suggested, and research has recently shown that bubbles may appear even without uncertainty, speculation, or bounded rationality. It has also been suggested that bubbles might ultimately be caused by processes of price coordination or emerging social norms. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

7. Economic bubble - Possible causes • While there is no clear agreement on what causes bubbles, there is evidence to suggest that they are not caused by bounded rationality or assumptions about the irrationality of others, as assumed by greater fool theory. It has also been shown that bubbles appear even when market participants are well-capable of pricing assets correctly. Further, it has been shown that bubbles appear even when speculation is not possible or when over-confidence is absent. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

8. Knowledge - Partial knowledge • This idea is also present in the concept of bounded rationality which assumes that in real life situations people often have a limited amount of information and make decisions accordingly. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

9. Information management - Information management concepts • While the theories developed at Carnegie Mellon clearly filled some theoretical gaps in the discipline, March and Simon did not propose a certain organizational form that they considered especially feasible for coping with cognitive limitations and bounded rationality of decision-makers. Through their own argumentation against normative decision-making models, i.e., models that prescribe people how they ought to choose, they also abandoned the idea of an ideal organizational form. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

10. Decision-making - Optimizing vs. satisficing • Simon coined the phrase "bounded rationality" to express the idea that human decision making is limited by available information, available time, and the information-processing ability of the mind https://store.theartofservice.com/the-bounded-rationality-toolkit.html

11. Controversy - Psychological bases of controversy • The puzzling phenomenon of two individuals being exposed to the same evidence and being able to reach different conclusions, has been frequently explained (particularly by Daniel Kahneman) by reference to a 'bounded rationality' - that is most judgments are made by fast acting heuristics (system 1) that work well in every day situations, but are not amenable to decision making about complex subjects such as climate change https://store.theartofservice.com/the-bounded-rationality-toolkit.html

12. Controversy - Psychological bases of controversy • This model allows the production of controversy to be seen as a consequence of a decision maker optimized for single-step decision making, rather than as a result of limited reasoning in the bounded rationality of Daniel Kahneman. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

13. Decision theory - Further reading • Arthur, W. Brian (May 1991). "Designing Economic Agents that Act like Human Agents: A Behavioral Approach to Bounded Rationality". The American Economic Review 81 (2): 353–9. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

14. Quantum cognition - Additional Reading • Blutner, R. (2009). Concepts and bounded rationality: An application of Niestegge's approach to conditional quantum probabilities. In L. Accardi, G. Adenier, C. Fuchs, G. Jaeger, A. Khrennikov, L. J. A. & S. Stenholm (Eds.), Foundations of Probability and Physics - 5 (Vol. 1101, pp. 302–310): NY: American Institute of Physics Conference Proceedings. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

15. Daniel Kahneman - Papers • Maps of bounded rationality: A perspective on intuitive judgment and choice https://store.theartofservice.com/the-bounded-rationality-toolkit.html

16. Herbert A. Simon • He coined the terms bounded rationality and satisficing, and was the first to analyze the architecture of complexity and to propose a preferential attachment mechanism to explain power law distributions.Simon, H https://store.theartofservice.com/the-bounded-rationality-toolkit.html

17. Herbert A. Simon - Sociology and economics • These factors limit the extent to which agents can make a fully rational decision, thus they possess only “bounded rationality” and must make decisions by “satisficing,” or choosing that which might not be optimal but which will make them happy enough. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

18. Herbert A. Simon - Sociology and economics • Theories of bounded rationality relax one or more assumptions of standard expected utility theory”. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

19. Herbert A. Simon - Selected publications • : – Reprinted in 1982, In: H.A. Simon, Models of Bounded Rationality, Volume 1, Economic Analysis and Public Policy, Cambridge, Mass., MIT Press, 235–44. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

20. Herbert A. Simon - Selected publications • * 1972. Theories of Bounded Rationality, Chapter 8 in C. B. McGuire and R. Radner, eds., Decision and Organization, Amsterdam: North-Holland Publishing Company. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

21. Herbert A. Simon - Selected publications • * 1982. Models of Bounded Rationality, Vols. 1 and 2. MIT Press. His papers on economics. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

22. Herbert A. Simon - Selected publications • * 1997. Models of Bounded Rationality, Vol. 3. MIT Press. His papers on economics since the publication of Vols. 1 and 2 in 1982. The papers grouped under the category The Structure of Complex Systems– dealing with issues such as causal ordering, decomposability, aggregation of variables, model abstraction– are of general interest in systems modelling, not just in economics. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

23. Theory of the firm - Behavioural approach • Simon’s work in the 1950s concerning behaviour in situations of uncertainty, which argued that “people possess limited cognitive ability and so can exercise only ‘bounded rationality’ when making decisions in complex, uncertain situations.” Thus individuals and groups tend to ‘satisfice’—that is, to attempt to attain realistic goals, rather than maximize a utility or profit function https://store.theartofservice.com/the-bounded-rationality-toolkit.html

24. Carnegie Mellon - Research • Carnegie Mellon is also home to the 'Carnegie School' of management and economics. This intellectual school grew out of the Tepper School of Business in the 1950s and 1960s and focused on the intersection of behavioralism and management. Several management theories, most notably bounded rationality and the behavioral theory of the firm, were established by Carnegie School management scientists and economists. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

25. List of biases in judgment and decision making - Common theoretical causes of some cognitive biases • * 'Bounded rationality' – limits on optimization and rationality https://store.theartofservice.com/the-bounded-rationality-toolkit.html

26. Rational choice theory - Definition and scope • This criticism has encouraged many social scientists to utilize concepts of bounded rationality to replace the absolute rationality of rational choice theory: this points to the difficulties of data-processing and decision-making associated with many choices in economics, political science, and sociology https://store.theartofservice.com/the-bounded-rationality-toolkit.html

27. Rational choice theory - Other assumptions • * An individual has the cognitive ability and time to weigh every choice against every other choice. Studies about the limitations of this assumption are included in theories of bounded rationality. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

28. Flipism - Flipism in decision-making • The concept of bounded rationality posits that people employ Cognitive miser|cognitive parsimony, gathering only what they expect to be sufficient information to arrive at a satisficing (or good enough) solution https://store.theartofservice.com/the-bounded-rationality-toolkit.html

29. Rationality - Max Weber • An alternative position on rationality (which includes both bounded rationality (Simons and Hawkins, 1949),Simons, H https://store.theartofservice.com/the-bounded-rationality-toolkit.html

30. Rationality - Psychology of Reasoning • Opponents of this view, such as Gerd Gigerenzer, favor a conception of bounded rationality, especially for tasks under high uncertainty.Sturm, Thomas (2012) https://store.theartofservice.com/the-bounded-rationality-toolkit.html

31. Rationality - Economics • Debates arise in these four fields about whether or not people or organizations are really rational, as well as whether it makes sense to model them as such in formal models. Some have argued that a kind of bounded rationality makes more sense for such models. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

32. Organization studies - History • In the 1960s and 1970s, the field was strongly influenced by social psychology and the emphasis in academic study was on quantitative research. An explosion of theorizing, much of it at Stanford University and Carnegie Mellon, produced Bounded Rationality, Informal Organization, Contingency Theory, Resource Dependence, Institutional Theory, and Organizational Ecology theories, among many others. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

33. Bounded rationality • Another way to look at bounded rationality is that, because decision-makers lack the ability and resources to arrive at the optimal solution, they instead apply their rationality only after having greatly simplified the choices available https://store.theartofservice.com/the-bounded-rationality-toolkit.html

34. Bounded rationality • The concept of bounded rationality revises this assumption to account for the fact that perfectly rational decisions are often not feasible in practice because of the finite computational resources available for making them. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

35. Bounded rationality - Model Extensions • As decision makers have to make decisions about how and when to decide, Ariel Rubinstein proposed to [http://arielrubinstein.tau.ac.il/book-br.html model-bounded rationality] by explicitly specifying decision-making procedures. This puts the study of decision procedures on the research agenda. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

36. Bounded rationality - Model Extensions • Huw Dixon later argues that it may not be necessary to analyze in detail the process of reasoning underlying bounded rationality https://store.theartofservice.com/the-bounded-rationality-toolkit.html

37. Decision making - Optimizing vs. satisficing • Simon coined the phrase bounded rationality to express the idea that human decision making is limited by available information, available time, and the information-processing ability of the mind https://store.theartofservice.com/the-bounded-rationality-toolkit.html

38. Satisficing • He referred to this approach as bounded rationality https://store.theartofservice.com/the-bounded-rationality-toolkit.html

39. Risk - Human factors • In particular, because of bounded rationality (our brains get overloaded, so we take mental shortcuts), the risk of extreme events is discounted because the probability is too low to evaluate intuitively https://store.theartofservice.com/the-bounded-rationality-toolkit.html

40. Homo economicus - Criticisms • They stress uncertainty and bounded rationality in the making of economic decisions, rather than relying on the rational man who is fully informed of all circumstances impinging on his decisions https://store.theartofservice.com/the-bounded-rationality-toolkit.html

41. Homo economicus - Responses • For example, models of individual behavior under bounded rationality and of people suffering from envy can be found in the literature.Geoffrey Brennan: [http://search.barnesandnoble.com/Culture-Social-Norms-and-Economics/Mark-Casson/e/9781858986173] Pareto Desirable Redistribution: The case of Malice and Envy, in: Culture, Social Norms and Economics(1997) It is primarily when targeting the limiting assumptions made in constructing undergraduate models that the criticisms listed above are valid https://store.theartofservice.com/the-bounded-rationality-toolkit.html

42. Social software (social procedure) - Other references • * W. Brian Arthur. Inductive reasoning and bounded rationality. Complexity in Economic Theory, 84(2):406-411, 1994. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

43. Organizational safety - Organizational Culture and Climate • of ignoring the role of disequilibrium dynamics and bounded rationality in shaping competitive outcomes, and https://store.theartofservice.com/the-bounded-rationality-toolkit.html

44. Organizational safety - Organizational Culture and Climate • demonstrate how both can be incorporated into strategic analysis to form a dynamic behavioural theory amenable to rigorous analysis.John D. Sterman, Rebecca Henderson, Eric D. Beinhocker, and Lee I. Newma,Getting Big Too Fast: Strategic Dynamics with Increasing Returns and Bounded Rationality,(2007).Management Science. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

45. Reinforcement learning • In economics and game theory, reinforcement learning may be used to explain how equilibrium may arise under bounded rationality. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

46. Design methods - Emergence of design research and design studies • Important to Simon's contribution were his notions of bounded rationality and satisficing https://store.theartofservice.com/the-bounded-rationality-toolkit.html

47. Asset specificity - Overview • Bounded rationality is defined as a semistrong form of rationality in which actors are assumed to be intendedly rational, but only to a limited extent https://store.theartofservice.com/the-bounded-rationality-toolkit.html

48. Evolutionary economics • The processes in turn emerge from actions of diverse agents with bounded rationality who may learn from experience and interactions and whose differences contribute to the change https://store.theartofservice.com/the-bounded-rationality-toolkit.html

49. Ernst Fehr • 'Ernst Fehr' (born June 21, 1956) is an economist from Austria. He is Professor of Microeconomics and Experimental Economic Research and chairman of the Department of Economics at the University of Zürich, Switzerland. His research covers the areas of the evolution of human cooperation and sociality, in particular Social justice|fairness, reciprocity (social and political philosophy)|reciprocity and bounded rationality. https://store.theartofservice.com/the-bounded-rationality-toolkit.html

50. Behavioral economics • The fields are primarily concerned with the bounded rationality|bounds of rationality of economic agents https://store.theartofservice.com/the-bounded-rationality-toolkit.html