Bounded rationality, ambiguity, and the engineering of choice

conceptions of bounded rationality. Recently, behavioral studies of choice have examined the second guess, the way preferences are processed in choice behavior. These studies suggest possible modifications in standard assumptions about tastes and their role in choice. This paper examines some of those modifications, some possible approaches to working on them, and some complications. 1. The engineering of choice and ordinary choice behavior * Recently I gave a lecture on elementary decision theory, an introduction to rational theories of choice. After the lecture, a student asked whether it was conceivable that the practical procedures for decisionmaking implicit in theories of choice might make actual human decisions worse rather than better. What is the empirical evidence, he asked, that human choice is improved by knowledge of decision theory or by application of the various engineering forms of rational choice? I answered, I think correctly, that the case for the usefulness of decision engineering rested primarily not on the kind of direct empirical confirmation that he sought, but on two other things: on a set of theorems proving the superiority of particular procedures in particular situations if the situations are correctly specified and the procedures correctly applied, and on the willingness of clients to purchase the services of experts with skills in decision sciences. The answer may not have been reasonable, but the question clearly was. It articulated a classical challenge to the practice of rational choice, the possibility that processes of rationality might combine with properties of human beings to

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