Costly and bounded rationality in individual and team decision-making

The "Savage paradigm" of rational decision-making under uncertainty has become the dominant model of human behavior in mainstream economics and game theory. However, under the rubric of "bounded-rationality", this model has been criticized as inadequate form both normative and descriptive viewpoints. This paper sketches the historical roots and some current development of this movement, distinguishing between attempts to extend the Savage paradigm ("costly rationality") and the need for more radical departures ("truly bounded rationality"). Copyright 2000 by Oxford University Press.

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