Why Bounded Rationality

This chapter considers four principles about decision-making by following Herbert Simon’s arguments. (1) The principle of bounded rationality. Bounded rationality is an alternative conception of rationality that models the cognitive processes of decision-makers more realistically. The capacity of the human mind for formulating and solving complex problems rationally is bounded. (2) The principle of satisficing. Optimizing is replaced by satisficing—the requirement that satisfactory levels of the criterion variables be attained. An individual establishes his or her goal as an aspiration level. (3) The principle of search. Alternatives of action and consequences of action are discovered sequentially through search processes. An individual sequentially searches for alternatives, and selects one that meets the aspiration level. (4) The principle of adaptive behavior. An individual continually adjusts his or her behavior to changing environments. Human rationality cannot be understood merely by considering the mental mechanisms that underlie human behavior. Instead, we should elucidate the relationship between the mental mechanisms and the environments in which they work.

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