Bounded rationality

Materials selection is as much an art as a rigorous science, and another computational approach to it, based on ideas of artificial intelligence, has been proposed by Arunachalam and Bhaskar (1999). They call their approach bounded rationality and exploit it to analyse the background to some notorious disasters based on material failure. We can always learn from failure as well as from success. 

POL.ll. I. Prigogine, Environmental Ethics in a time of Bounded Rationality, 6th CEC Summit Conference on Bioethics, Brussels, 1989 (CEC Luxembourg 1990). 

Ainslie argues that individuals use personal rules to overcome this inconsistency and to be able to stick to past decisions. In following a personal rule, they treat one consumption instance as one in a series of similar acts and their present choice as a predictor of future choices If I yield to temptation today, why wouldn t 1 do it again tomorrow Ainslie shows that rule-bound rationality may enable individuals to adhere to their original decision even when instant rationality would suggest a revision, (For a fuller discussion, see Ole-Jorgen Skog s chapter in this volume.)... 

Gigerenzer, G., 2003. Fast and frugal heuristics the tools of bounded rationality. In Koehler, D., Harvey, N. (Eds), Handbook of Judgment and Decision Making. Blackwell, Oxford, UK. 

Gigerenzer, G., Goldstein, D.G., 1996. Reasoning the fast and frugal way models of bounded rationality. Psychological Review 103, 650-669. 

Wang, S., D. Just, and P. Pinstrup-Anderson. 2006. Tarnishing silver bullets Bt technology adoption, bounded rationality and the outbreak of secondary pest infestations in China. Paper presented at the American Agricultural Economics Association Annual Meeting in Long Beach, CA, July 25. 

The concept of human bounded rationality (Simon, 1957) invites us to consider that the human mind does not try to find the best solution, but the satisfactory solution. A new technology can effectively be better (on a technical point of view) but refused by users who can prefer to carry on with an old technology. Two arguments can explain this behaviour. On one hand, the actual technology, tool or methodology can... 

Bounded rationality, 139, 140, 1020 Bowl feeders, 415 BP (back propagation), 163 BPl (business process improvement), 304 BPM (business process management), 1697 BPR, see Business process reengineering Brainstorming, 127, 2213 Branch and bound procedures, 1728-1729, 2592-2593... 

On the other hand, the filtering process of bounded rationality can lead to workers overweighting low probability events. This paradoxical result follows from the fact that the few such events not discarded will stand out in a reduced field of vision. Suppose, for example, that workers pay attention to the slim but catastrophic possibility of contracting lung cancer from airborne benzene. If as a result of bounded rationality this is one of only a half dozen or so job characteristics they register, they are likely to attach even more importance to this one risk than it deserves. ... 

Attitudes toward risk tend to be normative. Sharp distinctions are made between risks above and beneath the normative level, and individuals appear to be more conformist in their preferences than they really are. Given the constraints of bounded rationality - the inability to identify and assess each risk individually to our own satisfaction - we often rely on the views of others. This economizes on time and attention, and, providing we listen to the right voices, is a reasonable response to our cognitive limitations. From game theory, meanwhile, we have seen that attention to safety norms increases the likelihood of worker success in disputes over working conditions. 

The theory states further that the individuals bounded rationality is the main reason why individuals can be satisfied by mediocre solutions instead of optimal solutions in problem solving (Gigerenzer Selten 2002). The theory supports the symbohc perspective. 

Gigerenzer, Gerd and Selten, Reinhard (2002), Bounded Rationality , Cambridge The MIT Press, reprint edition, ISBN 0-262-57164-1. 

Simon, Herbert (1991), Bounded Rationality and Organizational Learning , Organization Science 2(1) 125-134. 

Simon, H. A. (1991), "Bounded rationality and organizational learning," Organization science, 2 (1), 125-34. 

Transaction cost theory is based on three behavioural assumptions bounded rationality, opportunism, and risk neutrality. According to Williamson (1985) three contractual features influence the level of the costs accompanying transactions (1) transaction-specific investments, (2) uncertainty accompanying the transaction, and (3) frequency of transactions. In the case of agricultural products/produce (like milk) the most distinctive product feature is perishability. This implies several contractual risks, for example the opportunistic behaviour of the contracting parties, or the so-called hold-up problem that comes up if one contracting party tries to exploit the other party s vulnerability connected to his asset specific investments (Royer, 1999 49). 

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