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A Behavioral Model of Rational Choice
Abstract
Introduction, 99. — I. Some general features of rational choice, 100.— II. The essential simplifications, 103. — III. Existence
and uniqueness of solutions, 111. — IV. Further comments on dynamics, 113. — V. Conclusion, 114. — Appendix, 115.
... [75] . 根据博弈者微观策略更新 规则的不同, 现有的确定性演化博弈动力学主要有 复制动力学(Replicator dynamics) [76−77] 、Logit动力 学(Logit dynamics) [73] 、BNN动力学 (Brown-von Neumann-Nash dynamics) [78] 和Smith动力学(Smith dynamics) [79] 等. 一般地, 这几个动力学系统可 统一地用如下的一个常微分方程来描述 [70] ...
... 特别地, 当 描述的策略更新规则采用不同 的具体形式时, 式(2)将会随之发生相应的改变. 例 如, 对应于复制动力学, 描述的微观策略更新规 则主要有 "成对比例模仿" (Pairwise proportional imitation) [80−81] 和 "不满意驱动模仿" (Imitation driven by dissatisfaction) [70] 两种形式. 具体地 系而引入的 [76] . ...
... 除此之外, 人们还发现复 制动力学方程的平衡点与它对应的博弈的Nash均 衡和ESS之间也存在着密切的联系 [73] , 比如复制动 力学方程对应的博弈的每个Nash均衡都是它的一 个平衡点; 复制动力学方程的每个Lyapunov稳定 平衡点都是其对应的博弈的一个Nash均衡; 博弈 的每个ESS都是其对应的复制动力学方程的一个 渐近稳定平衡点等. 正是由于这些等价关系的存在, 复制动力学方程也被视为是一种研究博弈论的动力 学方法 [70,73] . 另外, 在无穷小策略更新步长的条件 下, 复制动力学方程还与强化学习具有紧密的联系. 例如, Cross学习 [84] 和Q学习 [85−86] 的算法迭代式在 无穷小策略更新步长条件下将依概率收敛为一个复 制动力学方程 [87−89] . ...
In recent years, along with some ground-breaking advances made by artificial intelligence (AI) in Go, chess, video games, computer vision, natural language processing, and the analysis and prediction of protein struc- tures, the inherent barriers of traditional disciplines are gradually being broken, and a cross-discipline wave is stead- ily underway in academia. As three important components of modern intelligent science, game theory, multi-agent learning, and control theory have witnessed a closely interrelated relationship from the very beginning of their es- tablishments. Especially, with the aid of the great development of AI technologies in recent years, their interactions are becoming closer and closer, and the relevant interdisciplinary research is showing a blowout growth. To reflect this trend, in this paper, we provide a comprehensive survey of the connections, distinctions, and latest interdiscip- linary research progress of games, multi-agent learning, and control. Specifically, we first introduce four different types of games, which are normally used to connect these three fields. Then, corresponding to these four types of games, some multi-agent learning methods are reviewed. Subsequently, following different research topics, we sur- vey the latest interdisciplinary research progress of games, learning, and control. Finally, we provide a summary and an outlook for this emerging interdisciplinary field.
... This model is also named as economic model of crime (Becker, 1968) or enforcement model (Alm et al., 2016;Kirchler et al., 2008), by a group of researchers. Simon (1955) challenged this theory by arguing that rationality is effected by available information, cognitive capacity, and available time for decision making (Simon, 1955). These conventional models are proved to be ineffective because of high cost of implementing enforcement policies, such as audits and penalties (Bruno, 2019). ...
... This model is also named as economic model of crime (Becker, 1968) or enforcement model (Alm et al., 2016;Kirchler et al., 2008), by a group of researchers. Simon (1955) challenged this theory by arguing that rationality is effected by available information, cognitive capacity, and available time for decision making (Simon, 1955). These conventional models are proved to be ineffective because of high cost of implementing enforcement policies, such as audits and penalties (Bruno, 2019). ...
International Center for Tax and Development estimated that majority of the countries collect 80% of total revenue from taxation. However, most of the developing countries including Pakistan face difficulty in taxation compliance. In Pakistan, taxation system faces a major barrier to compliance in terms of trust deficit among citizens regarding tax authorities. The current study attempted to assess the influence of tax technology on taxation compliance and how it helps to formulate fairness perception about the taxation system. It employed Technology Acceptance model (TAM) to extract the variables of the study according to the local setting of Pakistan. The population of the study consisted of individual tax filers including two segments of the society, that is, salaried individuals and self-employed individuals. Snowball sampling technique was used to collect the data by using a self-administered questionnaire. The selected sample generated 169 complete and useable observations/responses. The data was analyzed by Structural Equation Modeling (SEM) through Smart PLS. The findings indicated a significant direct influence of perceived usefulness, perceived ease of use, and facilitating conditions on tax compliance. Moreover, fairness perception showed a significant positive influence on tax compliance, supported by fairness heuristic theory. The perceived tax fairness significantly mediates the association of the perceived ease of use and facilitating conditions with tax compliance. However, this mediation was not found in the relationship between perceived usefulness and tax compliance. This study could help tax administrators to cope with the issue of trust deficit among tax files and state authorities.
... The idea of bounded rationality was initially introduced by [37] and later adapted to the route choice context by [38]. The bounded rationality of drivers arises from habits or preferences for their route choices. ...
... [40], [39]). The term satisficing introduced by [37] comes from the combination of the words "suffice" and "satisfy". [41] was the first to apply the bounded rational behavior for path choices on regional networks considering the MFD dynamics. ...
Macroscopic traffic models represent a promising tool to design strategies for ecological routing. To benefit from this tool, we must first characterize the relationship between path emissions and distance traveled or travel time on aggregated networks, i.e., a regional network. This paper investigates this relationship between two toy networks and a real urban network representing the city of Innsbruck (Austria). We utilize an accumulation-based model based on the Macroscopic Fundamental Diagram to mimic the traffic dynamics in the network and utilize the COPERT IV model to estimate the travel emissions, focusing on the carbon dioxide CO2. We show that there is a linear relationship between the total emissions of CO2 and the average travel time of internal paths, i.e. paths that take place completely within a single region. We also show that in some cases, there is a linear relationship between the total emissions and the average travel distance or travel time of paths that cross multiple regions in the network. However, the latter is not always true as traffic dynamics play an important role in path emissions. In other words, eco-friendly paths on regional networks do not necessarily follow the shortest paths in terms of distance or time.
... Equation (12) states a budget balance requirement: the government does not tax more than what it needs in order to fund the construction of structural measures. Equation (10) states that the marginal benefits of taxation, aimed at raising revenues to fund the structural measure, must equal the marginal losses to owners induced by taxation, that is, the total weighted losses of revenues. The multiplier * can be understood to be the perceived value of income losses, given the hourly income of each owner. ...
... Combien de temps en avance entendez-vous généralement parler d'inondations dans votre municipalité? Je n'ai jamais entendu parler d'inondation dans ma municipalité 12. Selon vous, quelle est la probabilité que vous ayez à faire face à une inondation chez vous au cours des10 prochaines années? (a) Très basse (b) Basse (c) Ni basse, ni élevée (d) Élevée (e) Très élevée (f) Il n'y a aucune chance d'inondation (g) Je ne sais pas 13. ...
We provide a theoretical and empirical analysis of an efficient sharing of public and private flood-risk mitigation. Our analysis examines how individuals in a floodplain can best protect their property, given the interdependence between the public offering of structural measures and a private offering of insurance. A key theoretical finding is a separation of the risk space: under a given damage threshold, the public sector mitigates all risk, while above the threshold, the private sector offers insurance. We estimate this theory based on the Lake Champlain and Richelieu River data. We show how a public and private mix increases welfare gains and reduces overall spending on risk mitigation measures.
... Bu noktada davranışsal iktisat teorilerini sunan sınırlı rasyonalite kavramı ortaya çıkmaktadır (Albayrak, 2022: 161). Herbert Simon (1955)'' A Behavioral Model Of Rational Choice'' isimli çalışmasında rasyonellik varsayımının gerçekçi olmadığını ifade ederek bireylerin sınırlı rasyonel olduğunu öne sürmüştür. Buna göre rasyonel davranıştan sapmalar olabileceğini ve sezgiselliğin (heuristics) ve inançların ekonomik kararlar üzerinde etkin olabileceğini ifade etmiştir (Simon, 1955). ...
... Herbert Simon (1955)'' A Behavioral Model Of Rational Choice'' isimli çalışmasında rasyonellik varsayımının gerçekçi olmadığını ifade ederek bireylerin sınırlı rasyonel olduğunu öne sürmüştür. Buna göre rasyonel davranıştan sapmalar olabileceğini ve sezgiselliğin (heuristics) ve inançların ekonomik kararlar üzerinde etkin olabileceğini ifade etmiştir (Simon, 1955). Sınırlı rasyonalite, esasen "ekonomik insan" kavramının en temel yapı taşlarını sarsmaktadır. ...
Maliye Araştırmaları
... If trust in the experimenter influences how it is decided in situations that require postponing gratification (in this case, not eating the treat and expecting to get two in return), then it could be argued that we would no longer be simply facing a process that can be analyzed only from the perspective of expected utility, but rather in front of a case that is best described by the approaches of ecological rationality (already explained) and linked or bounded rationality. The theory of bounded rationality states that, due to the cognitive limitations of individuals, it is not possible to have or manage all the information related to decision making, so the objective of the decision is not to obtain the best option of all, but the one that is most satisfactory for the objectives of the actor (Simon, 1955 from this approach, our information processing systems develop adaptive strategies that provide a balance between the cognitive effort of seeking and processing information and choosing the best possible alternative. Simon (1955) described this strategy as satisfactory, because it does not necessarily find the best of all possibilities, but one that is good enough to meet the objectives of the decision maker. ...
... The theory of bounded rationality states that, due to the cognitive limitations of individuals, it is not possible to have or manage all the information related to decision making, so the objective of the decision is not to obtain the best option of all, but the one that is most satisfactory for the objectives of the actor (Simon, 1955 from this approach, our information processing systems develop adaptive strategies that provide a balance between the cognitive effort of seeking and processing information and choosing the best possible alternative. Simon (1955) described this strategy as satisfactory, because it does not necessarily find the best of all possibilities, but one that is good enough to meet the objectives of the decision maker. ...
This study analyzed the effect of confidence in the experimenter on the performance of a group of Costa Rican preschoolers on self-control. In addition, the effect of socioeconomic status on performance on the marshmallow task was analyzed by a comparison of children from both different schools (public vs private) and different socioeconomic contexts within each school. The sample of participants was 67 children (26 girls, M of age = 63 months, SD = 6.03). Effects were found, both of the confidence in the experimenter and of the socio-economic status in self-control. The implications of this study for future studies with children and families are discussed.
... However, in real life, human decisions cannot be completely rational (Simon, 1955;Tversky & Kahneman, 1974). This is because humans are not always motivated or have the capacity to engage in energyconsuming reflections; instead, they sometimes act impulsively or take mental shortcuts and avoid full information processing (Kahneman, 2011). ...
Introduction:
Feedback on human choices is important because it can affect risk-taking and rationality in subsequent decisions. In daily life, choices are not always followed by immediate outcomes nor are they always followed by simple, single-dimensional feedback. Here, we seek to extend previous studies on the effects of feedback on subsequent risk-taking in three experiments.
Methods:
We examine whether (1) the effect of feedback immediacy on participants' risk-taking exists in tasks containing explicit probabilistic outcome values; (2) increasing feedback dimensionality from one dimension (only about the outcome) to include a second dimension (also about the "rationality" of prior choices) increases feedback effects on risk-taking; and (3) cognitive reflection ability moderates feedback effects on risk-taking.
Results:
Results showed that feedback reduced risk-taking in tasks containing explicit probabilistic outcomes (Studies 1 and 2). They further showed that two-dimensional feedback produces a stronger reduction in risk-taking compared to single-dimensional feedback (Study 3). Lastly, results suggested that cognitive reflection ability moderates the effects of feedback on risk-taking (Study 4).
Conclusion:
Taken together, the findings extended the understanding of risk-taking and mitigating mechanisms and pave the way for intervention studies aimed at changing risky behaviors.
... In many ways, this juxtaposition represents the naturalistic turn he had in mind concerning human rationality. Coming "down from Olympus" and stepping "out of the armchair" were expressions he frequently used to motivate revising the descriptive and normative building blocks of rational decisions, which he insisted be grounded in evidence about the psychological and environmental basis of judgment and decision-making (Simon, 1955(Simon, , 1956. ...
The paper discusses how research on embodied cognition in cognitive science can contribute to the naturalization of rationality. The investigation takes place in two steps. First, we provide a conceptual map of possible new ideas of rationality inspired by embodied cognition. Given the plurality of theories of embodied cognition, we distinguish different approaches according to their increasing degree of radicalism. We consider ecological rationality as currently the best candidate for naturalizing rationality, and, after identifying its descriptive and normative building blocks, we provide an increasingly radical embodied interpretation of them. The outcome is four new concepts of rationality, in increasing order of embodied radicalism: embodied bounded rationality, body rationality, extended rationality, and radical embodied rationality. We emphasize that while less radical concepts currently align better with the idea of methodological naturalism, radical concepts are best conceived of as instances of ontological naturalism. The second step of our investigation concerns comparing the four embodied rationality concepts in light of three meta-criteria: internal epistemic values, empirical success, and intertheoretic compatibility. While empirical success currently favors less radical concepts, intertheoretic compatibility demonstrates the promises of rationality’s embodied radicalism.
... Conventional operating modes do not promote knowledge creation. They are more in a knowledge economy (in the sense of limited use) that is perfect for the limitation of human cognitive abilities as described by Simon [14]. The most elementary way for the company to build knowledge is then to foster the creation by men through the activity. ...
The industrial enterprise as a development organization of the country is as also concerned by the formation of its own elite. Indeed, in an economic environment increasingly complex and competitive, companies, especially those of industrial activity are now aware, more than ever, of the importance of knowledge management of their human resources as a primary factor for strengthening the innovative spirit of its employees, and therefore the performance of the different chains of the business. The concern of this article is, first, to describe the reasons for the emergence of the concept of knowledge management within firms. On the other hand, we will try to highlight the interests and objectives of this type of management, but more importantly, to highlight the difficulties and limitations of the application of its procedures.
... La decisión de ahorro se pospone. Además, el individuo prefiere lo que le resulta más cercano o conocido ya que no tiene plena capacidad cognitiva para procesar toda la información que recibe, tal y como son indica Simon (1957) en su teoría de la Racionalidad Limitada. Podemos concluir que, las tasas de descuento que utilizan los individuos a la hora de ahorrar disminuyen a medida que aumente el horizonte temporal. ...
El sistema público de pensiones en España se encuentra, desde hace años, en una situación complicada. Desde las instituciones está poniéndose en duda la sostenibilidad de éste en el medio y largo plazo. A pesar de estas alertas, no se están acometiendo cambios que hagan suponer una mejora. En este trabajo se analizan los sesgos y heurísticos que intervienen y que están frenando un cambio, desde la perspectiva de la economía conductual. Además, se plantean propuestas conductuales que serían un impulso al ahorro individual y que podrían ser la solución al problema.
... This set of elements requires that rational human beings meet certain difficultto-reach specifications, for example, that before making any decision, they accurately evaluate each of the alternatives, predict all their possible consequences, order them consistently with their forecasts, and assign specific probabilities to those uncertain events and their results (Simon, 1955). About these difficulties, poorly addressed in practice, Simon (1955) notes that the rational behavior model is limited by human capacities and the availability of information. ...
With many businesses unable to operate normally due to widespread government-imposed lockdowns, people confront a reshape of their financial behavior. In this article we review literature to analyze the theoretical foundations of financial well-being. The ongoing current worldwide recession worries about inadequate savings, consumerism and debt accumulation are all contributing to the increase in financial stress. We follow a qualitative-descriptive method based on a broad literature review and chronological analysis. This study will contribute to favor of establishing a theory of financial well-being to define, measure, and analyze it comprehensively. The creativity of this work lies in describing and contrasting several theoretical foundations together instead of addressing them separately. Our results are of interest to those involved in research about financial well-being, subjective well-being, and the economics of happiness.
... If repression and dissenters back down, the government carries out reforms but loses support and legitimacy; authoritarianism Notice that the cooperate/forgive and defect/punish strategies correspond to, respectively, "compromise" and "repress." In compromise, elites accommodate their opponent's concerns and settle on a satisficing outcome (a good enough but not maximum outcome) (Simon, 1955). Following existing game theoretical work on regimes, I conceptualize punishment as repression (Acemoglu & Robinson, 2001;Colomer, 1995;Przeworski, 2005). ...
This study considers recurrent authoritarian revivals. Unlike conventional studies that focus on authoritarian survival and durability, I study the periodicity of regime changes. Using the cases of Ottoman (18761918) and Republican (1923-1960) (2002-2017) Turkey, I show that recurrent authoritarian revivals are more likely in societies where anti-status quo groups assume power upon overthrowing an oppressive regime, begin reforming old institutions, and face dissent. Such governments are more prone to turning authoritarian because they feel menaced by dissent and choose repression over compromise. Repression initially targets old elites but extends to other dissenters as governments do not tolerate alternative reform projects. Cooperation does not arise because uncertainty, distrust, and past repression perpetuate the fear of survival. This article contributes to the regimes and institutionalism literatures by systematically studying an undertheorized issue and offering a mechanistic explanation of recurrent institutional outcomes based on government-opposition interactions and positive feedback.
... Several scholars have examined the process of information selection as part of a decisionmaking process in situations with limited information, high uncertainty, and ambiguity (Mintzberg, 1979;Simon, 1955;Weick, 1993). From a structural perspective on information processing, it has been suggested that effective communication occurs when formal communication channels are established within an organization or field. ...
This study investigates the influence of information excess due to the increased media coverage on the price volatility of cryptocurrencies. News coverages may serve as either signals or noise in cryptocurrency markets characterized by an insufficient understanding of the fundamental value of assets and a high level of strategic complementarity. In a game-theoretic model, we show that the number of news coverages, either related or unrelated to the fundamentals, increases the price volatility of assets in a nascent financial market. We tested our hypotheses using a unique dataset of 358,118 observations of 500 cryptocurrencies and 36,572 media coverages between 2014 and 2017, the early period of cryptocurrency with the rise of public attention. The results show that cryptocurrency price volatility increases in the number of unrelated news for both major and minor coins. The volatility even increases with the number of related news in minor coins. These results have important implications for investors and entrepreneurs about the effect of misinformation in nascent markets.
... This self-serving, opportunistic nature of individuals to optimize their interests cannot be fully achieved due to Simon's (1981) bounded rationality model explaining such behavior. Under this model, the idea of an optimal choice from all existing decision outcomes, as individuals so desire is rejected due to constraints in the complex real-world scenario (Simon, 1955(Simon, , 1956. Such constraints include time, cognition (e.g., attention), communication, costs, intellectual capacity, and computational capacity, among others (Tietz, 1992;Williamson, 1987). ...
Multiple stakeholders involved in the decision-making process have inherent interests that are sought to be maximized along with the collective goals specified by the organization as a whole. Due to the nature of these interests being diverse and often conflicting, an apparent dispute emerges which results in an even greater chaotic situation among stakeholders. Despite the introduction of several analytical and optimization tools to put the perspective of stakeholders into balance, there appears to be an inadequacy of frameworks that objectively incorporates the interests of stakeholders into a single metric. To advance this significant gap, this paper proposes a multiple stakeholder-based target-oriented robust optimization (MS-TORO) model which aggregates the interests of stakeholders into a single model with account for uncertainty. The conceptual and mathematical properties of the classical TORO model are used as a part of the MS-TORO framework to generate a satisficing solution with respect to the interests of multiple stakeholders. To demonstrate the applicability and validity of the proposed model, a hypothetical case study is performed in the decision process involving the post-departure aircraft rerouting problem. The system of the rerouting process involves multiple stakeholders each with inherent interests in an uncertain environment. Implementing the model provided solutions which satisfices the interests of multiple stakeholders as represented by the target metric minimizing the deviation from the performance targets of stakeholders. The proposed model not only confirmed the preferences of stakeholders in instances when a common route is selected but also showed non-biased solutions, thereby, adequately balancing interests.
... All else equal, MNCs should condition their OFDI on the apparent terrorism risk in both home and host countries. This account of MNC behavior accords with seminal theoretical work in macroeconomics that firms act as essentially rational actors given their constraints (Osborne & Rubinstein, 1994;Simon, 1957;Taylor, 1983). Drawing upon the international business and political violence literatures, we treat terrorism as a country-specific-disadvantage (CSD) that undermines national institutions. ...
... It is well known that information can cause behavioral change (Simon, 1955). Different channels through which information changes behavior, such as door-to-door information campaign (Madajewicz et al., 2007) and mass media and newspapers (Campa, 2018;Tu et al., 2020), have been studied. ...
... These choices use "fast and frugal" heuristics to reduce their mental effort [82]. However, people may not always leverage knowledge or factor in the information around them into these processes [83]. In this way, imperfect attention, incomplete perception of information, and the resulting incorrect attributions can further complicate users' personalization activities. ...
Purpose
Customizing the accessibility and ease-of-use settings of a computer can improve the overall user experience for people with and without disabilities. However, the adoption of such settings remains poor. This study investigates why various factors may influence people as they personalize and when they choose to integrate those changes into everyday use.
Methods
To better understand how these factors may impact people’s personalization process, we conducted a series of interviews involving 15 people with and without disabilities across several months in 2020 when computer usage became required due to the COVID-19 lockdown. We used grounded theory to analyze 49 semi-structured interviews with participants. During these interviews, people reflected upon: past attempts at personalization using built-in accessibility or ease-of-use features of their Operating System (OS) or other assistive technologies (AT), current customization activities using the personalization software, Morphic, and future opportunities for personalization systems and features.
Results
We identified several barriers, facilitators, and perpetuating factors that can influence why and when people choose to adopt and integrate their personalization changes. We also outline the overall personalization lifecycle, which illustrates when various factors may impact computer personalization.
Conclusion
Personalization activities are complex and easily affected by an ecosystem of influential factors that surround them. When paired with the three design considerations and ten lessons learned from this qualitative study, the overall personalization lifecycle may be useful during the design and development of future personalization systems or features for people with and without disabilities.
... The Tolman-Simon synthesis and the organizational framework of bounded rationality -habit, behavioral routines, choice, purpose, means-ends, identification, loyalty, memory, stimulus response -also owes much to ideas borrowed from Chester Bernard, John Dewey, Harold Lasswell and Talcott Parsons. His ideas of bounded rationality, based on severe restrictions of an agent's knowledge and cognition, his adaptive search behavior and knowledge restrictions of various options, as well as the agent's computational constraints at understanding the task environment, were addressed implicitly in Administrative Behavior, elaborated in the textbook, Public Administration (Simon et al., 1950) but not fully expounded coherently into a frontal attack on rational economic models until his celebrated article in Harvard's Quarterly Journal of Economics (Simon, 1955). Both Administrative Behavior and Organizations stress identification as a compelling integration mechanism between organizational goals and alignment with individual and group goals. ...
... Based on the APG level, executives decide whether to increase or decrease innovation input (Cho et al., 2016;Kuusela et al., 2016). However, boundedly rational decision-makers tend to take innovation input as risky (Simon, 1955), as it takes time to eventually turn firms' innovation input into financially desirable returns (Nelson, 2009). Thus, firms need to balance benefits and risks when making decisions on innovation inputs (Chiambaretto et al., 2019;Cho et al., 2016). ...
While extant research shows a curvilinear relationship between aspiration performance gaps and innovation input, we know far less about how vocational experiences of key firm decisions makers may shift this relationship. We propose the concept of executives’ vocational socialization and explore how it influences the relationship between firms’ aspiration performance gaps and innovation input from the perspectives of the behavioral theory of the firm and upper echelons theory. We theorize that two aspects of executives’ vocational socialization, namely, executives’ technical career experience and firm tenure, strengthen the inverted U‐shaped relationship between the negative aspiration performance gap and innovation input and weaken the U‐shaped relationship between the positive aspiration performance gap and innovation input respectively. We test these hypotheses using a panel dataset of 1158 listed firms in China from 2008 to 2017, and the empirical results from switching regression and fixed‐effect models support our hypotheses. Our study contributes to research on the aspiration performance gap, innovation input, and behavioral theory of the firm. This article is protected by copyright. All rights reserved.
... Methodological individualism lies at the root of much economic theory (Arrow 1994). In psychology, too, a large literature views individuals as having limited cognitive abilities and thus characterized them as having bounded rationality (Simon 1955). A boundedly rational decision maker uses (weak) general purpose search and inference heuristics to solve problems in domains where the decision maker does not know the structure of the environment, and more powerful pattern recognition processes when there is a known (ecological) structure in the environment (see Simon 1990 for an overview of "invariants" of human behavior"). ...
... However, this dichotomy not very satisfactory in practice, because rationalizability fails to explain the overwhelming majority of observed choice behaviors. 11 Recently, following the inspiring analysis of Simon (1955), the notion of rationalizability has been amended by several forms of bounded rationality, which aim to explain a larger portion of choice behaviors by means of more flexible paradigms. To wit this trend, there are tens of models of bounded rationality in choice that have been proposed in the last twenty years: see Giarlotta, Petralia, and Watson (2022a) for a vast account 7 Here, we purposely avoid mentioning the symmetric part of the relation of reveled preference, because it is irrelevant to detect the rationalizability of a choice. ...
All possible types of deterministic choice behavior are classified by their degree of irrationality. This classification is performed in three steps: (1) select a benchmark of rationality, for which this degree is zero; (2) endow the set of choices with a metric to measure deviations from rationality; and (3) compute the distance of any choice behavior from the selected benchmark. The natural candidate for step 1 is the family of all rationalizable behaviors. A possible candidate for step 2 is the metric described by Klamler (2008), who incorrectly claims this is the only one satisfying five intuitive properties. While proving a correct characterization of this metric, we determine the causes of its low discriminating power, and design a high-discerning variation of it. In step 3 we use this new metric to establish the minimum distance of any choice behavior from the benchmark of rationality. We conclude by describing a measure of stochastic irrationality, which employs the random utility model as a benchmark of rationality, and the Block-Marschak polynomials to measure deviations from it.
... Esto genera las posibles alternativas y las elección estratégica final. Además, la perspectiva de los escalones superiores se soporta en la racionalidad limitada (Simon, 1955), que afirma que las personas tienen una capacidad limitada de procesar toda la información del entorno, en consecuencia centra su atención en unos pocos aspectos que para ellas son centrales. ...
SCENARIOS: A TOOL IN THE CONSTRUCTION OF A PEACE PROCESS IN SOUTHERN COLOMBIA
El desarrollo de este trabajo es parte de la investigación doctoral Diseño de Escenarios en la Construcción de Paz Florencia-Caquetá, y tiene como objetivo identificar los escenarios en el proceso de construcción de paz desde la percepción de los estudiantes universitarios en el sur de Colombia. Por ello es la oportunidad de repensar el conflicto armado que se ha prolongado de manera diversa e intensa, y que ha causado dolor y pérdidas irreparables a la sociedad. Los escenarios no predicen lo que va a suceder, pero sí permiten comprenderlo de una mejor manera para redefinir nuestras acciones y atender lo que podría suceder mañana. La investigación se estructuró des-de el paradigma interpretativo, con un enfoque mixto de corte transversal. Los resultados identificaron los escenarios denominados Paz a Medias, Paz en las Mismas, Paz Negativa y la apuesta Paz Visionaria, que permite crear, develar, descubrir, diseñar y hasta construir futuros más convenientes, factibles y deseables.
... These decisions all involve multiple potentially negative courses of action, and often have significant, long-lasting implications for the decision-maker, those involved, and society at large (Shortland et al., 2019). Theories of decision-making often center on the assumption that the decision-maker chooses the course of action by identifying the "best" or the choice with the highest "expected value" (Simon, 1955(Simon, , 1978Tversky and Kahneman, 1974;Kahneman and Tversky, 1979;Hastie and Dawes, 2009). Yet in many cases, decision makers are presented with courses of action that have uncertain outcomes and in which each potential outcome could have negative implications (Klein, 1993;Cannon-Bowers and Salas, 1998). ...
Individuals in positions of power are often required to make high-stakes decisions. The approach-inhibition theory of social power holds that elevated power activates approach-related tendencies, leading to decisiveness and action orientation. However, naturalistic decision-making research has often reported that increased power often has the opposite effect and causes more avoidant decision-making. To investigate the potential activation of avoidance-related tendencies in response to elevated power, this study employed an immersive scenario-based battery of least-worst decisions (the Least-Worst Uncertain Choice Inventory for Emergency Responses; LUCIFER) with members of the United States Armed Forces. In line with previous naturalistic decision-making research on the effect of power, this research found that in conditions of higher power, individuals found decisions more difficult and were more likely to make an avoidant choice. Furthermore, this effect was more pronounced in domain-specific decisions for which the individual had experience. These findings expand our understanding of when, and in what contexts, power leads to approach vs. avoidant tendencies, as well as demonstrate the benefits of bridging methodological divides that exist between “in the lab” and “in the field” when studying high-uncertainty decision-making.
Although efforts have made by scholars to explain the relationship between aspiration performance gap and innovation input, the results are inconsistent from different perspectives. In this study, we draw on behavioral theory and the embeddedness perspective to explore how and when firms' aspiration performance gap affect innovation input. We theorize that there is an inverted U-shaped relationship between the negative aspiration performance gap and innovation input, which can be strengthened by executives' technical career and academic backgrounds. We also propose that there is a U-shaped relationship between the positive aspiration performance gap and innovation input, which can be weakened by executives' technical career and academic backgrounds. We test the hypotheses using a panel dataset of 1158 listed firms in China from 2008 to 2017. The empirical results support our hypotheses. Our study contributes to the empirical research results of performance feedback by providing an explanation for the inconsistent linear relationship conclusions of previous studies.
Sustainable development of civil engineering, construction and building technology can be supported by fundamental scientific achievements and development theories. The current paper aims at over viewing the state of the art in terms of published papers related to theoretical methods that are applied to support sustainable evaluation and selection processes in civil engineering. The review is limited solely to papers referred to in the Clarivate Analytic Web of Science core collection database. As the focus is on development, it aims at reviewing how the papers on developments and applications have been distributed and journals. The articles are grouped by research domains, problems analyzed and the decision-making approaches used. The findings of the current review paper show that Devekionebt if applications have been constantly growing and particularly increased in the last three years, confirming the great potential and prospects of sustainable development of civil engineering, construction and building technology.
The paper deals with the application of aspects of behavioral finance in the context of investor protection reflected in EU financial regulation which puts an emphasis on disclosure requirements. Traditionally, financial regulatory frameworks maintain a status que assumption of “rational investors” contained within neoclassical economic theory, however reoccurring financial incidents have exposed a critical flaw in this understanding, consequently requiring a further examination of behavioral aspects within the context of financial regulation. It remains ambiguous how regulators may best use findings from behavioral finance to address flaws in their investor protection tools. Furthermore, neither expanding disclosure obligations nor enforcing a tougher paternalistic approach may suffice in their intent.
This paper seeks to answer the question: what impacts athletes’ decision-making to continue or withdraw from an endurance sport event under environmental uncertainty amid the rise of extreme weathers? Underpinned by prospect theory and the framework of risk information seeking, qualitative data were collected via 14 in-depth semi-structured interviews with amateur and professional athletes and coded using thematic analysis. Findings suggest that endurance sport athletes do consider withdrawal as an option before and during an event. The severity of weather and a lack of physical and psychological preparedness may lead to the decision of withdrawal. Additionally, different decisions can be made under an interplay between weather conditions and physical and psychological status. Event organisers, family, friends and fellow participants may also influence athletes’ decision-making. Finally, based on personal goals set for an event, both risk-seeking (continue) and risk-aversion (discontinue) behaviours may occur when facing the same environmental uncertainty. The paper calls attention to protecting athletes’ wellbeing by undertaking timely withdrawals under environmental uncertainty. By highlighting the vulnerability of endurance sport athletes to environmental uncertainty, this study encourages event organisers to evidence their ability to face environmental uncertainty and enhance/preserve their reputation in event risk management.
Decision making has evolved throughout the years, nowadays harnessing massive amounts and types of data through the unprecedented capabilities of data science, analytics, machine learning, and artificial intelligence. This has potentially led to higher quality and more informed decisions based on the collaborative rationality between humans and machines, no longer bounded by the cognitive capacity and limited rationality of each on their own. However, the multiplicity of modes of collaboration and interaction between humans and machines has also increased the complexity of decision making, consequentially complicating ex-ante and ex-post decision evaluation. Nevertheless, evaluation remains crucial to enable human and machine learning, rationalization, and sensemaking. This paper addresses the need for more research on why and how to evaluate collaborative rationality-based decisions, setting the stage for future studies in developing holistic evaluation solutions. By analyzing four relevant streams of literature: 1) classical decision theory and organizational management, 2) cognitive and neuroscience, 3) AI and ML, and 4) data-driven decision making, we highlight the limitations of current literature in considering a holistic evaluation perspective. Finally, we elaborate the theoretical underpinnings from the knowledge base on how humans and machines evaluate decisions, and the considerations for evaluating collaborative rationality-based decisions.
We advance a socio-cognitive explanation of the grouping of a firm's activities into distinct divisions, each responsible for a specific set of activities. We argue that categorization creates expectations regarding which activities should be bundled, and grouping decisions that are inconsistent with these expectations are sanctioned. Hence, organizational grouping and reconfiguration decisions of multidivisional firms are influenced by categorical expectations, in addition to the interdependencies and shared external contingencies underlying a firm's activities and their perceptions and interpretations among managers. We also expect that the illegitimacy discount and associated performance penalty resulting from a firm's divergence in organizational grouping choices from categorical expectations will be lower for firms that span multiple categories or belong to an incoherent category. The socio-cognitive explanation we develop informs four theoretically relevant topics—labelling of organizational units, analogical reasoning, organizational identity, and categorical expectation violations—and has implications for future empirical research on organization design.
In this study, we couple an integrated flood damage and agent-based model (ABM) with a gravity model of internal migration and a flood risk module (DYNAMO-M) to project household adaptation and migration decisions under increasing coastal flood risk in France. We ground the agent decision rules in a framework of subjective expected utility theory. This method addresses agent’s bounded rationality related to risk perception and risk aversion and simulates the impact of push, pull, and mooring factors on migration and adaptation decisions. The agents are parameterized using subnational statistics, and the model is calibrated using a household survey on adaptation uptake. Subsequently, the model simulates household adaptation and migration based on increasing coastal flood damage from 2015 until 2080. A medium population growth scenario is used to simulate future population development, and sea level rise (SLR) is assessed for different climate scenarios. The results indicate that SLR can drive migration exceeding 8000 and 10,000 coastal inhabitants for 2080 under the Representative Concentration Pathways 4.5 and 8.5, respectively. Although household adaptation to flood risk strongly impacts projected annual flood damage, its impact on migration decisions is small and falls within the 90% confidence interval of model runs. Projections of coastal migration under SLR are most sensitive to migration costs and coastal flood protection standards, highlighting the need for better characterization of both in modeling exercises. The modeling framework demonstrated in this study can be upscaled to the global scale and function as a platform for a more integrated assessment of SLR-induced migration.
We explore the determinants affecting the emergence of the “pervaded banking system” (PBS) – a mixed system encompassing traditional banks and continuously entering fintech companies – in Austria, Germany, and Switzerland. Drawing on a sample of 604 fintech companies and 802 banks, we compile an unbalanced panel dataset between 2015 and 2019 and employ a fixed-effects negative binomial model to analyze tie formation processes between fintech companies and banks using three analytical perspectives: (i) geographical colocation, (ii) network embeddedness, and (iii) combined effects. Our empirical results demonstrate that geographical factors, network-related drivers, and combined effects positively impact the formation of ties between banks and fintech companies. This study contributes to the debate in small business literature by illuminating how small firms affect system emergence. We make recommendations for bank and fintech managers, as well as political decision-makers, who need a profound systemic understanding to adapt strategies and set the institutional framework.
Evolutionary game theory originated in population biology from the realisation that frequency-dependent fitness introduced a strategic element into evolution. Since its development, evolutionary game theory has been adopted by many social scientists, and philosophers, to analyse interdependent decision problems played by boundedly rational individuals. Its study has led to theoretical innovations of great interest for the biological and social sciences. For example, theorists have developed a number of dynamical models which can be used to study how populations of interacting individuals change their behaviours over time. In this introduction, this Element covers the two main approaches to evolutionary game theory: the static analysis of evolutionary stability concepts, and the study of dynamical models, their convergence behaviour and rest points. This Element also explores the many fascinating, and complex, connections between the two approaches.
GC Harcourt made many fundamental and essential contributions to the development of capital investment theory – most famously via his development of the Cambridge Capital Controversies, exposing conceptual and analytical flaws and contradictions in neoclassical approaches to defining and measuring capital. Relatedly, Harcourt also made essential contributions to our understanding of how accounting rules, used by real-world businesses to guide their investment decision-making, create anomalies and deficiencies in the accumulation of capital at a microeconomic level – with significant, deleterious consequences for the accumulation of capital at a macroeconomic level. In developing Harcourt’s contributions, this paper links Harcourt’s early insights about accounting rules with subsequent developments in behavioural economic models of business decision-making, thus aligning Harcourt’s contributions with insights from behavioural models of investment decision-making. These insights are then combined in showing how the misapplication of investment appraisal criteria at a microeconomic level contributes to under-investment and investment volatility in the macroeconomy, with negative implications for output, employment, labour productivity, wages and cyclical volatility.
‚Wendezeit‘, ‚the turning point‘, nennt Capra sein berühmtes Werk (Capra, Wendezeit, Knaur, 1988). Wenn man sich die Schlagzeilen der letzten Jahre vor Augen führt, könnte man jedoch vielmehr geneigt sein zu sagen, dass wir in einer ‚Krisenzeit‘ leben, in der eine Krise die nächste ablöst; in einer Zeit, in der überall auf dem Globus parallel Krisen auftreten, wieder verschwinden, um mit noch verheerenderen Wirkungen irgendwo wieder aufzutauchen. Capra sah in den neunzehnhundertachtziger Jahren dahinter eher eine Wahrnehmungskrise der westlichen Welt, heute hat man dagegen den Eindruck, es handele sich um empirische Begebenheiten: ‚Börsenchaos‘, ‚Rohstoffkrise‘, ‚Chaos statt arabischer Frühling‘, ‚Demokratie-Krise‘, ‚drohende kollektive Altersarmut‘, ‚Energie-Chaos‘, ‚Erdbeben-Katastrophen‘, ‚Euro-Krise‘, ‚Finanzkrise‘, ‚Flüchtlingskrise‘, ‚Globalisierungsfalle‘, ‚Hunger-Katastrophen‘, ‚Klima-Katastrophe‘, ‚Nah-Ost-Konflikt‘, ‚Politikvertrauenskrise‘, ‚Reaktor-Katastrophen‘, ‚Revolutionen‘, ‚Schuldenkrise‘, ‚Tsunami-Chaos‘, ‚Wirtschaftskrise‘ etc.
The rapid advances of science and technology have provided a large part of the world with all conceivable needs and comfort. However, this welfare comes with serious threats to the planet and many of its inhabitants. An enormous amount of scientific evidence points at global warming, mass destruction of bio-diversity, scarce resources, health risks, and pollution all over the world. These facts are generally acknowledged nowadays, not only by scientists, but also by the majority of politicians and citizens. Nevertheless, this understanding has caused insufficient changes in our decision making and behavior to preserve our natural resources and to prevent upcoming (natural) disasters. In the present study, we try to explain how systematic tendencies or distortions in human judgment and decision-making, known as “cognitive biases,” contribute to this situation. A large body of literature shows how cognitive biases affect the outcome of our deliberations. In natural and primordial situations, they may lead to quick, practical, and satisfying decisions, but these decisions may be poor and risky in a broad range of modern, complex, and long-term challenges, like climate change or pandemic prevention. We first briefly present the social-psychological characteristics that are inherent to (or typical for) most sustainability issues. These are: experiential vagueness, long-term effects, complexity and uncertainty, threat of the status quo, threat of social status, personal vs. community interest, and group pressure. For each of these characteristics, we describe how this relates to cognitive biases, from a neuro-evolutionary point of view, and how these evolved biases may affect sustainable choices or behaviors of people. Finally, based on this knowledge, we describe influence techniques (interventions, nudges, incentives) to mitigate or capitalize on these biases in order to foster more sustainable choices and behaviors.
Mutually beneficial cooperation is a common part of economic systems as firms in partial cooperation with others can often make a higher sustainable profit. Though cooperative games were popular in 1950s, recent interest in noncooperative games is prevalent despite the fact that cooperative bargaining seems to be more useful in economic and political applications. In this paper we assume that the strategy space and time are inseparable with respect to a contract. Furthermore, it is assumed that each firm’s strategy polygon is a geodesic polygon which changes its shape every point of time with the stubbornness strategy surface of firm’s executive board follow a Gaussian free field. This gives us more flexibility to deal with generalized geodesic cooperative games which is the main contribution of this paper. Under this environment we show that the strategy spacetime is a dynamic curved Liouville-like 2-brane quantum gravity surface under asymmetric information and that traditional Euclidean geometry fails to give a proper feedback Nash equilibrium. Cooperation occurs when two firms’ strategies fall into each other’s influence curvature in this strategy spacetime. Small firms in an economy dominated by large firms are subject to the influence of large firms. We determine an optimal feedback semicooperation of the small firm in this case using a Liouville-Feynman path integral method.
Research on the returns to specialist versus generalist careers has largely neglected what drives individuals’ motivations to build different career profiles in the first place. Although specialization is widely associated with benefits, generalist careers are seen as more at risk except in certain mitigated conditions. At the same time, given the uncertainty in labor markets, future returns to specialization cannot simply be assumed. We introduce in this paper a novel mechanism behind the formation of generalist careers, opportunity-enhancing generalism, whereby workers willingly give up the benefits to specialization to dissociate from a past expertise considered to yield relatively poor future prospects. On the premise that one’s prior experience provides the basis for exploration-versus-exploitation decisions, we argue that aspects of one’s previous jobs, including status, will importantly affect decisions about whether to continue specializing. Specifically, negative feedback about prospects for advancement in their prior jobs will increase workers’ motivation to search for jobs in new areas of expertise. Focusing on managerial workers’ job search decisions, we predict that individuals who come from low-status firms, low-status work domains, or both will be more likely to search for jobs in a new area than job seekers coming from high-status firms and work domains. Using data on job searches in a Master in Business Administration labor market, we find support for our prediction and suggestive evidence for the opportunity-enhancing mechanism we propose.
Funding: This work was supported by the French National Research Agency [Grant “Investissements d’Avenir” Labex Ecodec/ANR-11-LABX-0047] and the Spanish Ministry of Science and Innovation [Grant MCIN/AEI/10.13039/501100011033].
Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1663 .
People often use heuristics as mental shortcuts when making financial decisions. Although the literature typically considers heuristics as behavior biases, we explore how different types of heuristics differ from one another. Through peer-to-peer lending data, we observe that borrowers who use limited attention when applying for loans tend to choose round loan amounts, simplifying the decision-making process but compromising accuracy. This round-number heuristic decreases their funding success rate and increases the probability of default. On the other hand, some borrowers select loan amounts in “lucky numbers” that superstitious lenders favor. This lucky-number heuristic caters to the lenders’ preference, thus increasing the borrowers’ funding success rates and reducing the likelihood of default. Our paper demonstrates that borrowers select heuristics based on their motives, leading to varying consequences. We also show that heuristics are not all the same, and people’s choice of heuristics provides insight into their characteristics and can predict decision outcomes. For instance, factoring in heuristic usage information improves default prediction accuracy in our setting. Our findings can be beneficial to practitioners in refining the underwriting and screening of borrowers and loans.
Suderburger Arbeitspapier Nr. 15: Dokumentation der
Fragebogenentwicklung (Scale-Development Study) für die Intuitionsforschung RHIA
We examine the rational assumption of the interchangeability of legal and illegal monies. Drawing from economics, behavioral economics, and sociology we answer two main research questions: (1) Do offenders perceive money earned across various income-generating activities (legal vs. illegal) in the same way? (2) How do consumption patterns (spending and saving) differ across various forms of income-generating activities?
We use an a priori mixed methods approach with two interrelated studies; a quantitative survey of incarcerated offenders (N = 58) and a qualitative study of semi-structured interviews from four separate previous research projects (N = 107).
We find evidence for the existence of differential consumption patterns based on quantitative and qualitative data from both incarcerated and active offenders regarding their patterns of spending legal and illegal money.
Our findings have implications for choice theories of crime, for public policy approaches to poverty, and crime prevention interventions.
The aim of this thesis study is to explain the gift exchange theory through behavioral labor economics and measure the effect of the psychological effects of the gift on the effort behavior in the employer-employee relationship. In the thesis, 'Gift Exchange Theory' was examined in terms of behavioral labor economics and a pilot gift exchange experiment was applied.
In this context, the relationship between behavioral economics and labor economics is explained, the gift exchange theory is defined in terms of its emergence and development and compared with other wage theories. In addition, some gift exchange experiments in the literature were examined within the scope of theory.
With the pilot gift exchange experiment in the research part of the thesis, an experimental study was carried out with twenty participants at the Faculty of Political Sciences of Ankara University. Within the scope of the experiment, ten participants were in the control group, while ten participants were in the experimental group. Many statistical measurements were made depending on the difference between the effort levels of the two groups.
In this experiment, the relationship between the demographic data of the participants and the gift exchange, the effectiveness of the gift exchange were examined. Accordingly, the variation of its effectiveness over time was tested. As a result of the experiment, no relationship was observed between demographic data and gift exchange. On the other hand, it was determined that the gift exchange was effective on the experimental group and this effect continued to increase over time.
Finally, the findings obtained in the experiment and the studies in the literature and examined in this thesis study were compared, the contributions of the study to the literature and the aspects that needed improvement were mentioned.
A distinction is drawn between a sales contract and an employment contract, and a formal model is constructed exhibiting this distinction. By introducing a definition of rational behavior, a method is obtained for determining under what conditions an employment contract will rationally be preferred to a sales contract, and what limits will rationally be placed on the authority of an employer in an employment contract. The relationship of this model to certain other theories of planning under uncertainty is discussed.
This paper seeks to survey the literature in economics, philosophy, mathematics, and statistics on the subject of choice among alternatives the consequences of which are not certain. Attention is centered on the suggested modes of describing uncertainty and on the theories of rational and actual behavior of in individuals making choices.